3 Simple Ways to Earn Passive Income on your investments.
Don’t let your assets sleep while you do.
Here are 3 simplest ways for you to earn passive income on your investments, even if you’re a beginner.
The typical way in which most people try to earn passive income on investments (with little to no effort) is through buying-and-holding — popularly known as “HODLing” in the community.
But even this can tend to become time-consuming and stressful.
👉 In the buy-and-hold strategy, you’re constantly required to:
- Keep track of your portfolio
- Capitalize on opportunities
- Rebalance and update your position
And even after all that hassle — it’s not a reliable source of passive income. Even a seasoned investor can experience highly unpredictable and prolonged periods of losses.
The best way to survive this?
👉 Opt for alternative methods of trading and investing in digital assets — which pay income similar to earning interest on buying-and-holding, but come without the headache of the research and maintenance that comes with it.
Having said that — here are 3 ways in which you can earn a potential passive income from your investments with little to no management efforts:
1/ INTEREST-BEARING ACCOUNT
Just like you go to a bank and deposit your money and earn interest on that — similarly, you could deposit your assets through exchanges and earn a pre-set (fixed) return on the amount you hold.
This is the most straightforward method.
The rationale behind this is that if you’re planning to hold onto the underlying asset anyway, then you may as well earn some interest during that period.
Stable coins (USDC or USDT) pay significantly higher interest because there’s a universal demand for them.
Also, there might be a “lockup period” involved, where you can’t access your funds for a certain amount of time.
With digital assets, there’s no central regulatory authority overseeing all the activities and transactions — which is why there’s a need for a “checks-and-balances” system to be in place to make sure everything is working as it should.
In an effort to keep the system decentralized while having a monitoring authority over it — investors can stake their digital assets (during which they’ll be in a “lockup period”) and vote to receive rewards — when they do this, the transactions are validated.
The amount you stake translates into the number of votes you have on the blockchain. When the majority of the votes move in the same direction and the transaction is confirmed — those who stake their coins get a reward.
In this method, you would lend your assets to someone else who agrees to pay you back with an interest (set by the platform or according to the current market rate) within a fixed period of time.
In the event that they default, there’s a chance you could get some or all of your money back — as these loans are backed by the borrower’s own assets as a clause in the agreement — meaning, the borrower has to lock away the same amount as that which is being lent to him.
Also — these loans are built around smart contracts — so the blockchain takes care of all the terms for you and the process is completely automated — so you don’t have to worry about tracking a defaulter down for payment.
Another thing to note is that: interest rates increase when borrowers > lenders and they decrease when lenders > borrowers.
While considering all of this,
📌 Keep in mind that:
The returns will depend on the chosen method and the amount invested. Given the volatility of the market, there’s no guarantee that any method will definitely deliver returns.
- It’s up to you to weigh the risk/reward ratio before taking action
- Use only reputable exchanges/platforms
- Beware of platforms offering high returns — they may be Ponzi Schemes
- Even though there are platforms that are safe, nothing is risk-free
- Make sure you research thoroughly about the token, exchange and platform you’re investing with and the entire process involved in the same
However, despite all of this…
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