3 simple passive income ideas for 2023

Nowadays, everyone is looking for ways to generate passive income. This makes sense. Who wouldn’t want less income in today’s inflationary environment?

Here, I will highlight three simple investment-based passive income ideas for 2023. All three strategies are very easy to set up and can be started with a few hundred pounds.

Equity income fund

One very easy way to generate extra cash flow is to invest in equity income funds. It aims to provide investors with long-term capital gains and income – a winning combination when it comes to building wealth.

In investment platforms such as Hargreaves Lansdowne and AJ Bell, there are many equity income funds to choose from. Most tend to yield around 3%-4%. However, there are some products that offer higher results.

One fund that I consider my current portfolio is Next dividend payment on FTF Martin Currie UK Rising shares (income version). This fund – which aims to provide investors with income that increases over time – does not have the highest yield (currently less than 3%). But it has produced a very solid total (capital gain plus income) over the long term. Past performance is not an indicator of future performance.

It is worth pointing out that in Hargreaves Lansdown, one can start investing in funds with just £100.

Investment trust

Another easy way to generate passive income is to invest in income-focused investment trusts. These products are similar to equity income funds, but are listed on the stock market and trade like stocks. So, one usually has to pay a trading commission to buy and sell.

One belief that I consider a portfolio is Murray Income Trust. It has a good track record in rewarding investors with income. Indeed, being classified as a ‘dividend hero’ means that it has increased its income payout every year for more than 20 years. The current yield is over 4%.

Another thing I noticed was Merchants Trust. It is also a dividend hero. It has yielded almost 5% now.

Stock dividend

Finally, we have dividend stocks. These are shares that pay a proportion of the company’s earnings to shareholders, in cashon a regular basis.

Investing in dividend stocks is safer than investing in mutual funds and trusts. This is because stock prices tend to be more stable than the prices of funds and trusts.

However, on the flip side, there are higher rewards on offer. For example, in London Stock Exchangethere are many dividend stocks that yield 6% and higher at this time.

One stock I’m looking at right now is Legal & General Group. Currently the sport yields around 7.5%, which means that an investment of £1,000 could generate an income of around £75 per year for me.

Of course, with this strategy, it is important to manage risk. The best way to do this is to own a variety of stocks from different industries.

By taking a diversified approach, investors can dramatically lower their portfolio risk and put themselves in a good position to generate solid long-term returns.