The Best Passive Income Investments for 2021

By: Andrew McShane

Creating a stream of income is crucial for your financial goals. That's why we looked at the best passive income investments on the market today.

You are about to learn...

  • Why Passive Income is Important
  • The Different Types of Passive Income Investments
  • The Best Passive Income Investments for 2021

Many investors dream of building the strongest income stream possible so that they can live comfortably after they retire. To do that they need to accumulate the best passive income investments in the market today that generate a safe and reliable stream of income.

Think of passive income as making money while you sleep.

But the best passive income investments are not always easy to spot, particularly if you are newer to investing. Too often less knowledgeable investors blindly pick the higher yielding assets without evaluating the risks. Normally the best income investments are those that yield a reasonable amount of income that grows over time. Beware of the high yield asset that looks too good to be true.

It is that increasing income stream and dividend growth rate that is the true indicator of the health of the a great passive income investment. In other words, the best passive income does not always come from the highest yielding assets if there is too much risk.

Why Passive Income Investments are Important

Passive income is generally defined as income you receive that requires little to no effort on your part. In some cases, there may be some effort early on to get the income stream up and running, but to truly be passive income it requires very little effort on a regular basis. Some of the passive income examples we will discuss come from bank certificates of deposit, or investment in certain types of stock and bonds, or the rental of real estate.

Building the best passive income stream is important. Let’s face it, most of us want to retire at some point in our lives whether it is at a traditional age of 65 or something else. In order to continue to live a lifestyle that is similar to what you had during your working years, many people aspire to build the best passive income investments that will generate passive income during their later years in life that will fund that good lifestyle.

Different Types of Passive Income

So let’s discuss the pros and cons of the different passive income ideas out on in the market today. To help you build the best passive income stream possible we will be sure to highlight two of the passive investment options that we like the best right now.

1. Bank Certificates of Deposit

Bank certificates of deposits previously were a popular bank service because they offered an interesting interest rate on your money and your principal is guaranteed up to $250,000 by the Federal Deposit Insurance Corporation. If you agreed to lock up your savings with a bank for a specified period of time, you would get a better interest rate then you would get on a traditional bank savings account.

However, now with interest rates so low you will get less than 1% on a one-year certificate of deposit. So while it is great that certificates of deposit are still insured up to $250,000, the interest rates offered are so low as to not be very compelling.

While it is fine for bank certificates of deposit to be part of a diversified portfolio of income investments, just know that this type of passive investing will not generate much passive income.

2. United States Government Bonds

United States Government Bonds are popular because they are also backed by the financial wealth of the United States, making the risk of default virtual nil. You can lend your hard earned savings to the U.S. Treasury for a term that ranges from a couple of months all the way up to 30+ years knowing that you will be repaid at the end of the term of the promissory note.

The downside of investing in United States Government Bonds is similar to that of investing in bank certificates of deposit. The interest rates are so low as to hardly be worth the trouble.

So again, it is fine to include United States Government Bonds as part of a diversified portfolio of income investments, you just will not make that much from this passive income stream.

3. Corporate Bonds

Investing in corporate bonds is effectively lending money to businesses. These businesses offer to pay you a periodic interest rate and pay your principal back in full upon maturity.

The benefit of a corporate bond is that you know exactly what your passive income stream will look like as it is memorialized in the note payable between the two parties.

Also favorable to a corporate bond holder is that they stand in line in front of any payments to shareholders, which is more important if the business is not doing well.

The biggest challenge to a corporate bond holder is that they can only earn a fixed amount and do not participate in the upside of a company’s profits if the business does well.

Although the interest rate earned on a corporate bond is higher than a United States government bond, the rates are still relatively low for the higher risk you are taking.

We would not recommend investing heavily in corporate bonds. But if you must invest, only the most experienced investors should invest in individual corporate bonds. Most investors are best suited investing in bond index funds like Vanguard Short Term Investment Grade Fund (ticker VFSUX).

4. Dividend Paying Stocks

There are so many dividend paying stocks in the public markets today, it can be hard for investors to develop a dividend investing strategy.

The negative about investing in dividend paying stocks is that shareholders sit behind all creditors when it comes to getting paid. So the only time a dividend will be declared by the business’s board of directors is if all creditors are being paid on time.

And while there is a list of “dividend kings” and “dividend aristocrats’ businesses that have increased their dividend many years in a row, there is a much longer list annually of companies that cut or reduce their dividends because the business is going through a rough patch.

The benefits of owning dividend paying stocks as one of the best passive income producers is that if you pick the right companies that are growing revenues and profits you will be rewarded via a higher stock price and higher dividends over time. This is a very attractive combination and why we believe that dividend paying stocks are one of the two best passive income investments for 2021.

Over time at Wealthplicity, we have developed a market beating criterion for investing in dividend paying stocks to help generate and grow the best passive income stream.  We will only recommend a dividend paying stock that meets all five of the following criteria:

  1. The business needs to operate in an industry that is healthy and growing. The better the industry, the better your chances on a market beating return.
  2. The business needs to be successful and growing. No turn around situations here as they are difficult and not right for a passive income portfolio.
  3. There needs to be a long-term track record of paying (and preferably growing) a dividend. Nothing better than a long-term track record of paying a dividend to help assure you that that will continue in the future.
  4. The company needs to be run by a well-respected CEO.
  5. The balance sheet needs to be healthy, with no more than a reasonable amount of long-term debt. Remember that dividends are only paid to shareholders after all creditors are paid, so we need to be sure that there is no more that a reasonable amount of long-term debt on the balance sheet to help assure we get paid our dividends.

The Best Passive Income Investments for 2021

One of the best dividend paying stocks we like right now is Dominion Energy (ticker D).

best income investments

Dominion Energy is one of the largest regulated electric utilities in the United Stated with a market capitalization of more than $50 billion.

Dominion Energy services primarily the southeastern United States, which is growing nicely and should continue well into the future.

They pay a dividend that currently yields 3.6% and should be increased 5% to 7% per year going forward, supported by increased profitability from its regulated operations.

Dominion Energy is one of the best passive income investments today. Buying it today could lock in a 9% to 10% annual return via dividends paid plus stock price appreciation over the long term.

Own a Rental Property

There are almost 50 million rental housing units in the United States. While many of them are owned by large real estate businesses, quite a few of them are owned by individual investors. Maybe being a landlord is right for you as a way to earn passive income. Have you ever considered being a landlord and buying real estate as a way to earn passive income?

With a rental property like single family homes, the idea is to fund the purchase via a down payment as your investment and fund the rest with bank debt. If properly structured, the rental income from the property will cover your mortgage and other related expenses, leaving you with some extra cash each month. This net cash flow from rental activities combined with the (hopefully) appreciation on the property over time could generate a very attractive passive return on your investment.

The pros of owning a rental property are the ability to generate an attractive return on your investment, combined with the idea of you being a small business owner. And much of this attractive return can be earned in a very passive way.

The negatives on owning a rental property is that If you lose your tenants, you will still need to make your mortgage payment out of your own pocket.

If you are interested in understanding more about owning a rental home, check out the app “Roofstock.” Roofstock allows people to purchase a rental home from markets all over the country.


Our Rating:



Launched in 2015, Roofstock is a rental property marketplace where investors can sort through over 70 markets and buy single-family rental properties.

best for:

Passive income investors, Rental income

Get Roofstock Pros & Cons


  • Low fees
  • Non-Accredited Investors
  • Property Managers available


  • Large down payment
  • You are now a landlord

Crowdfunding with Real Estate

But let’s say you want to invest in real estate, but you don’t want to be a landlord. Investing in real estate via crowdfunding is a great option. In fact, we believe in crowdfunding for real estate so much, we also think it is one of the best two passive income opportunities for 2021.

Ten years ago, the idea to invest in real estate deals was limited to an elite group of accredited investors and venture capital funds. Things got a lot simpler for individual investors in 2012 when Congress passed the JOBS Act, which eased the country’s security regulations.

With the passing of the JOBS act, non-accredited investors (which is most of us) can invest between $2,000 and $100,000 annually (depending on your annual income and net worth).

This was a huge step for the smaller investor who previously was shut out of most of these real estate deals.

With the passing of the legislation in 2012, a new mini-industry call crowdfunding sprung up for this new type of smaller investor. Crowdfunding is a great name describing the investing of small amounts by a large number of investors to fund various businesses, including real estate.

You can now go on to many online investing platforms to review prospectuses, perform due diligence and invest in these kinds of real estate deals. All the information you need to make an investment decision is right there on the funding portal. You might be asked to invest in stock, debt, or convertible debt, but either way you get to perform due diligence and decide.

One of the best apps that allows you to invest in crowdfunded real estate is Fundrise. Fundrise is available for both accredited and non-accredited investors and takes a value approach to their privately owned REIT portfolios.


Our Rating:



Fundrise is an online real estate investing platform that allows non-accredited investors the opportunity to invest in real estate through both debt and equity. The Fundrise portfolio is based on “value investing” where their experts acquire assets for less than the intrinsic value.

best for:

Passive Income Investors, Crowdfunding Real Estate

Get Fundrise Read Our Full Review Pros & Cons


  • Great Usability
  • Non-accredited investors
  • Avg. 10-12% annual returns last 5 years
  • Low Min investments


  • Fees are a little confusing but not daunting

In Summary:

Building the best passive income stream that can safely carry you as you get closer to your retirement age is a goal of many investors.

But there are lots of passive income options with various pro and cons that you need to understand and navigate through.

Although the best passive income investment portfolios will take a diversified approach, we believe right now that dividend paying stocks and crowdfunding for real estate offer the best returns in the markets today.

Use the ideas discussed above as you start your research on your way to building a portfolio of the best passive income investments.

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