Smart passive income ideas

Some people might hear the words 'passive income' and think they can give up work. But at its heart, this concept is about creating ongoing cash flow and giving you more freedom and control over your financial security.

Here are some practical tips to start building passive income.

What is passive income and why does it matter?

Common ways to earn passive income

Why is it good to start building passive income early?

Are there risks involved in building passive income?

Passive income mistakes to avoid

Passive income is money you can earn by putting in time, effort and investment upfront. It's meant to add to your main income, not replace it.

Unlike other investments that grow slowly, passive income can give you steady cash flow and help balance market ups and downs.

Think of passive income as a smart way to support your financial goals. Explore ways to include it in your plan to earn steady money and grow your wealth over time.

Now that you understand the basics of passive income investments, you’re probably wondering: what are some passive income ideas to explore?

Revenue from passive income often comes from low-volatility investments like:

Investments like these can provide more predictable income streams. This stability makes them a reliable part of your portfolio, potentially requiring less time and effort to manage.

They're better for long-term investing, so you don't have to stress about perfectly timing the market – buying at the lowest price and selling at the highest. 

Your Australian superannuation can also generate passive income if it invests in assets that generate income, like ETFs or property. This can help provide a reliable income stream in retirement with tax benefits: earnings are taxed at 15% and pension phase withdrawals can be tax-free if you're over 60.

See the Australian government moneysmart site for more information on Tax and super contributions.

Earning passive income early helps you work toward financial freedom and grow your money over time. By reinvesting what you earn, you can use the power of compound interest to keep building your wealth.

Here's how these two big benefits can improve your financial future.

Passive income comes from investments that pay dividends, distributions or interest on your shares, or investments.

Depending on your situation, investments with dividends that grow by 15%, 20% or even 25% annually may generate enough income over time to cover your living expenses. This could pave the way to financial independence, giving you the freedom to pursue your goals without relying solely on a single source of income.

It's important to note that past performance does not guarantee future results. Investment values and income can rise or fall, and you may not recover the full amount you invested.

See how much savings you should have, and how your savings plans compare based on your age, income and goals.

You can take dividends or interest as cash, but reinvesting them allows you to benefit from compound interest. This means your earnings grow on top of previous earnings, as dividends and interest are calculated on a larger total each time. Over time, this helps your portfolio grow faster.

Although passive income investments can be less volatile, just like all investments, there's still a risk that you could lose the money you invest, or that you might not have the revenue stream you had expected. 

Here are some potential risks that you may run into:

To manage risk effectively, it's important not to put all your eggs in one basket. Diversifying your portfolio by spreading your money across different investments can help protect your income streams. That way, if you lose money on one, it could be balanced out by your other investments.

Diving into passive income without a plan could lead to failure. A clear strategy helps you set long-term goals and make informed decisions. It’s about staying focused on sustainable growth while remaining flexible and open to new opportunities.

Expecting instant results could potentially be a recipe for disappointment. Passive income takes time, effort, and patience to build. Avoid falling for big promises and focus on steady progress to achieve lasting success.

Once you have an eligible HSBC bank account, you can begin earning online passive income through HSBC WorldTrader. Available on the HSBC Australia Mobile Banking app and in HSBC Online Banking, WorldTrader gives you access to over 80 exchanges in 30 markets.