The 9 Best Income-Generating Assets

There's a simple formula for building wealth:

1. Make money.
2. Spend less than you make.
3. Invest the difference.

If you've already handled the first two, step three is where momentum builds. This is where you can turn your savings into consistent cash flow.

Below are nine of the best income-generating assets to help supplement your income while also growing your net worth over time.

You don't need a large portfolio or specialized knowledge to get started. Most of these assets are accessible to anyone looking to put their money to work more effectively.

What are income-generating assets?

Income-generating assets are investments that produce regular cash flow while you own them. Instead of relying solely on price appreciation, they pay you directly through dividends, interest, rent, or distributions.

Common examples include dividend-paying stocks, bonds and bond funds, rental real estate, REITs, and private credit or lending investments.

Some of these assets may also appreciate over time, but their primary purpose is to generate income you can reinvest or use to supplement your earnings.

Summary of the best income-generating assets

	Risk/reward*	Timeframe	Minimum investment
1. Bonds	Low-to-medium	Short-to-long	$100
2. Dividend stocks	Medium-to-high	Long	$5
3. Cash equivalents	Low	Very short	$5
4. Rental real estate	Medium	Long	$5
5. Real estate investment trusts (REITs)	Low-to-medium	Medium	$5
6. Peer-to-peer lending	Medium	Short-to-medium	$25
7. Private credit	Medium	Short	$500
8. An annuity	Medium-to-high	Long	Varies
9. Yourself	Low risk, high reward	Long	Free

*Generally speaking, risk and reward are interconnected. The higher the potential reward of an asset, the higher its risk.

Disclaimer: Ratings are my opinion. Content is for educational purposes only; it is not investment advice. Actual results may vary. Conduct your own due diligence.

1. Bonds

• Risk/reward: Low-to-medium
• Time commitment: Short-to-long
• Minimum investment: $100
• Platform: Public
  

Bonds are one of the most common and dependable income-generating assets. They're designed to produce predictable cash flow, which makes them especially useful for supplementing income or stabilizing a portfolio.

When you buy a bond, you're lending money to an issuer for a fixed period of time. In return, the issuer agrees to pay you interest at regular intervals and return your original investment at a specified maturity date.

For example, a $1,000 bond with a 5% annual coupon pays $50 per year in interest.

If those payments are made semiannually, you'd receive $25 every six months until the bond matures, at which point you'd receive your last interest payment and your original $1,000 back.

The two most common types of bonds are government bonds and corporate bonds.

• Government bonds are issued by entities like the U.S. Treasury. Because the U.S. government has an extremely low risk of default, Treasury bonds tend to have the lowest yields relative to other bonds.
• Corporate bonds are issued by companies like Microsoft (MSFT) and Ford (F). They pay higher interest rates than government bonds to compensate investors for taking on more risk, with yields varying based on the financial strength of the issuing company.

Bonds also vary by maturity — the length of time until the principal is repaid.

Short-term bonds may mature in a few months or years and tend to offer lower yields. Long-term bonds can stretch 10, 20, or even 30 years and typically offer higher yields in exchange for tying up your money for longer.

Most bonds can be bought and sold on the secondary market at any time, so you don't have to hold them until maturity to access your money. You can also buy bond funds, which bundle many bonds together and provide instant diversification.

Overall, bonds are valued for their stability and reliable income, which is why they're a cornerstone of both conservative and income-focused portfolios.

Pros	Cons
Predictable income	Lower long-term return potential than stocks
Lower volatility than stocks
Easily accessible to all investors

2. Dividend stocks

• Risk/reward: Medium-to-high
• Time commitment: Long
• Minimum investment: $5
• Platform: Public

Dividend stocks are likely the next most popular income-producing assets, especially among investors who want income while still participating in long-term growth.

Buying a stock gives you partial ownership in a company. When you buy a stock, you're purchasing a small piece of that business and are entitled to a share of its profits and growth over time.

Dividend stocks are shares of companies that regularly return a portion of their profits to shareholders as cash dividends. These payments are typically made quarterly, though some companies pay monthly or annually.

Well-known dividend-paying companies include Coca-Cola (KO), Johnson & Johnson (JNJ), and Procter & Gamble (PG), all of which have long track records* of consistent dividends.

*These three are among the Dividend Aristocrats, companies in the S&P500 index that have been raising their dividends every year for at least 25 years.

Rather than relying on a single company, many investors choose dividend-focused ETFs for diversification. These funds hold baskets of dividend-paying stocks and distribute the income to investors.

Popular examples include the Vanguard Dividend Appreciation ETF (VIG) and the Schwab U.S. Dividend Equity ETF (SCHD).

But owning stocks isn't always easy. To earn long-term stock returns (which are roughly double bond returns), investors need to tolerate regular volatility.

Historically, markets experience a 10% decline about every other year, a 30% decline roughly once every four to five years, and a 50% or greater drawdown a handful of times per century.

Because of this, stocks (including dividend stocks) are best suited for investors with a long-term mindset of at least 10 years, who can stay invested through market swings.

Still, for investors with a long-term view, dividend stocks and ETFs can provide a mix of regular income and long-term appreciation, making them a core income asset for many portfolios.

Important note on dividend yield

Dividends aren't “free money.” When a company pays a dividend, that cash comes out of the value of the business. If you own a $100 stock and it pays a $5 dividend, the stock price will fall to $95 (all else equal), leaving you with $95 worth of stock and $5 in cash.

From a total-return perspective, this means investors can often end up in the same place by holding non-dividend-paying stocks and periodically selling shares to generate cash flow. Dividends change how returns are delivered, not whether returns exist. You can learn more about this here, here, and here.

Pros	Cons
One of the most (if not the most) reliable creators of long-term wealth	Higher volatility than bonds (and many other assets)
Easily accessible to all investors

3. Cash equivalents

• Risk/reward: Low
• Time commitment: Very short
• Minimum investment: $5
• Platform: Public
  

When experienced investors talk about holding “cash,” they're usually referring to cash equivalents.

Unlike money sitting in a traditional savings account (which earns almost nothing), cash equivalents are low-risk investments designed to preserve capital while paying interest.

They're highly liquid, meaning you can access your money quickly, and they're commonly used for emergency funds, short-term savings, or money waiting to be invested.

Common cash equivalents include high-yield savings accounts (HYSAs), certificates of deposit (CDs), money market funds (MMFs), and Treasury bills.

Many HYSAs, CDs, MMFs, and Treasury bills are currently paying yields between 3–5%, so if you're holding cash for an emergency fund or an upcoming expense, moving that money into a cash equivalent can meaningfully increase your income.

And since most of these options are FDIC-insured or government-backed, your money has the same level of protection as it would sitting in a bank account.

Public users have access to both an HYSA (paying 3.3%) and Treasury bills. You can compare rates for CDs and MMFs on Raisin.

Pros	Cons
Earn competitive, near risk-free interest	Limited long-term wealth-building potential
High liquidity, with easy access to your money
Ideal for emergency funds and short-term savings

4. Rental real estate

• Risk/reward: Medium
• Time commitment: Long
• Minimum investment: $5 or $10
• Platforms: Arrived or Fundrise
  

Rental real estate is another popular asset for generating income. When done well, it can produce steady monthly cash flow while also benefiting from long-term price appreciation.

Investing in rental properties comes with several advantages. You can:

• Earn ongoing rental income
• Participate in property value growth
• Take advantage of tax benefits such as depreciation and deductible expenses

Plus, real estate has also historically served as a good hedge against inflation, as rents and property values tend to at least keep pace with rising costs.

That said, direct real estate investing comes with meaningful tradeoffs.

For starters, buying an investment property typically requires a sizable upfront commitment, often a 20–25% down payment, which can be a major barrier to entry.

Finding a good deal also takes a lot of work and a certain amount of expertise. Most real estate investors analyze dozens of properties before finding one that makes financial sense.

Even after you find a good property and buy it, there's plenty of ongoing work. You'll need to screen tenants, handle maintenance and repairs, manage vacancies, and deal with unexpected issues as they arise.

While you can outsource this work to property managers, it will reduce your net income.

If all of this sounds like too much work, you may be interested in Arrived or Fundrise, two of the best crowdfunding real estate investment platforms. 

These platforms allow you to invest in rental properties and start building a real estate portfolio with as little as $10, while their professional teams handle acquisition, management, and operations.

However, while these platforms lower the barrier to entry and effort required, net returns may be lower after platform fees, and you'll have less control than owning property outright.

Pros	Cons
Can be an excellent source of monthly cash flow	High upfront capital requirements
Multiple ways to earn returns	Requires ongoing oversight
	Requires some expertise

5. Real estate investment trusts (REITs)

• Risk/reward: Low-to-medium
• Time commitment: Medium
• Minimum investment: $5 or $10
• Platforms: Public or Fundrise

If you like the idea of earning income from real estate but don't want to manage properties, commit large amounts of capital, or invest through a crowdfunding platform, REITs can be an attractive alternative.

A Real Estate Investment Trust (REIT) is a business that is organized solely to own, manage, and generate income from real estate properties.

By law, REITs must distribute at least 90% of their taxable income to shareholders as dividends. Because of this requirement, REITs are especially popular among income-focused investors looking for regular cash flow.

REITs vary widely, with each focusing on specific property types such as apartments, single-family homes, offices, or industrial real estate. This allows investors to choose the exact category they're most interested in.

There are three main types of REITs:

• Publicly traded REITs trade on stock exchanges like regular stocks and are available to all investors (see this list of REITs).
• Private REITs do not trade on exchanges and are typically limited to accredited investors.
• Publicly non-listed REITs, like Fundrise's, do not trade on a stock exchange but are available to all investors.

One key tradeoff is volatility. Publicly traded REITs tend to sell off during stock market declines, even if the value of the underlying real estate remains relatively stable.

As a result, REITs may feel more volatile than direct real estate ownership despite owning the same type of tangible assets.

Pros	Cons
Regular, tax-efficient dividends	Higher volatility than traditional real estate investments
Easily accessible to all investors

6. Peer-to-peer lending

• Risk/reward: Medium
• Time commitment: Short-to-medium
• Minimum investment: $25
• Platform: Prosper

Peer-to-peer lending allows you to earn income by lending money directly to other individuals.

Platforms like Prosper connect investors with borrowers seeking loans for things like home improvements, debt consolidation, vehicle purchases, or major life expenses. 

Borrowers make monthly payments that include both principal and interest, and investors receive their proportional share of those payments automatically.

This creates a predictable stream of income, similar to a bond, but tied to individual consumer loans instead.

Each loan on Prosper is given a grade from AA (low risk, low return) to HR (higher risk, higher return). Over the last three years, the average investor on Prosper has a rolling return of 5.3% (net of fees and losses).

This is modestly higher than the roughly 4% yields available on high-quality corporate bonds today, though it comes with greater risk.

For that reason, diversification in P2P lending is critical. Spreading your investment across a number of loans helps reduce the impact of any single borrower defaulting.

Pros	Cons
Passive, monthly income payments	If the economy falters, a number of borrowers could miss their payments simultaneously
Mid-risk, mid-reward

7. Private credit

• Risk/reward: Medium
• Time commitment: Short
• Minimum investment: $500
• Platform: Percent (accredited investors only)

Publicly traded companies can raise capital by issuing bonds in the public markets. Private companies, however, don't have that option. Instead, they rely on private lenders for debt financing, which is broadly referred to as private credit.

Like corporate bonds, private credit is designed to generate steady income through interest payments. The difference is access.

Because private credit is less liquid and available to a smaller pool of investors, borrowers often agree to more favorable terms, resulting in higher yields for lenders.

Private credit investments typically share a few characteristics:

• Higher yields: Platforms like Percent have historically offered double-digit returns, with a weighted average APY of 14.47%.
• Shorter durations: Many private credit deals are short term, with Percent's average maturity around 16.6 months.
• Low correlation: Because these loans exist outside of public markets, private credit tends to be less correlated with stocks and publicly traded bonds.

The primary drawback is access. Most private credit opportunities are limited to accredited investors, and the investments are less liquid than publicly traded assets.

For investors who qualify (see requirements below) and are comfortable with the risks, private credit can be a compelling way to generate higher income and diversify beyond traditional fixed income.

You can sign up for Percent and get a bonus of up to $500 when you make your first investment.

Accreditation requirements

To qualify as an accredited investor, you must meet one of the following criteria:

• Have an annual income of $200,000 individually or $300,000 jointly.
• Have a net worth that exceeds $1,000,000, excluding your main residence.
• Be a qualifying financial professional.

Pros	Cons
Higher yields than traditional bonds	Limited to accredited investors
Diversification outside of public markets	New deal flow can be slow

8. An annuity

• Risk/reward: Low-to-medium
• Time commitment: Long
• Minimum investment: $5,000+
• Platforms: Fidelity, Schwab, or many insurance companies
  

An annuity is a contract with an insurance company that turns a lump sum of money into predictable income. They're most commonly used by retirees or those nearing retirement who value stability over growth.

You invest money upfront, and in return, the insurer agrees to make regular payments either immediately or starting on a future date. Those payments can last for a set period or for the rest of your life, depending on the annuity.

There are many types of annuities, but the most common are deferred fixed annuities. For example, someone nearing retirement might purchase a deferred fixed annuity at age 60 with a $200,000 lump sum.

Once they retire at 65, the annuity would begin paying $1,200 per month for the rest of their life, depending on interest rates, life expectancy assumptions, and the specific contract terms.

As illustrated in the example above, the primary benefit of annuities is certainty. Payments aren't tied to market performance, which can make them useful for covering essential expenses.

The downsides are reduced flexibility, complexity, and high fees. Annuities often lock up capital, include surrender charges for early withdrawals, and may carry fees that limit overall returns.

Annuities tend to work best as a supplemental income tool rather than a core growth investment, particularly later in life when predictable cash flow matters most.

Pros	Cons
Predictable, guaranteed income	Capital is locked up for long periods
Useful for covering essential, recurring expenses	Fees and surrender charges can reduce returns
	Limited upside compared to market-based investments

9. Yourself

• Risk/reward: Low risk, high reward
• Time commitment: Long
• Minimum investment: Free
• Resources: YouTube, books, courses, certifications

One of the most overlooked investments is yourself.

Before any portfolio optimization, the first step in building wealth is earning money. Investing in your skills, education, and career leverage is often the fastest and most reliable way to increase income, especially early on.

Many people spend years trying to squeeze an extra 1–2% out of their investments while ignoring opportunities to increase their income by 10% or 20% through skill development, job changes, or negotiating higher salaries.

Active income is underrated, and for most people, it's the easiest place to start.

Skills also compound.

As Scott Adams famously noted, it's often the combination of multiple above-average skills that creates outsized value. You don't need to be world-class at one thing. Being good at a few complementary skills can make you unusually valuable.

Plus, unlike with investments, income rarely moves backward. Raises, promotions, and higher-paying roles tend to reset your income floor higher over time, which then gives you more capital to invest elsewhere.

Good books, courses, and hands-on learning offer some of the highest returns available. And even without money, free resources like libraries, YouTube, and open online courses have made skill-building more accessible than ever.

If your goal is more income, don't underestimate the power of investing in your greatest asset: you.

Pros	Cons
Can have a very fast ROI	Takes time, effort, and some financial resources
Can scale up a lot over time
Extremely asymmetric investment

What about art, cryptocurrency, gold, and collectibles?

Alternative investments have become increasingly popular in recent years due to their potentially high returns, diversification, and excitement from the market.

While they can be fine investments, they typically aren't income-producing assets. Therefore, they weren't included in this list.

You can still make money from investing in these types of alternatives, but your gains will be from appreciation and speculation, not underlying fundamentals.

Final verdict

Investing in income-generating assets can change the role your money plays in your life. 

Instead of sitting idle or relying entirely on future price appreciation, your savings begin producing cash flow that you can reinvest, spend, or use to reduce reliance on your paycheck.

That income creates flexibility. It can accelerate compounding when reinvested, smooth out market volatility, or fund expenses without forcing you to sell assets at the wrong time.

Over time, those small, consistent cash flows can meaningfully increase both your income and your net worth.

The goal isn't to maximize yield or replace growth entirely. It's to build a portfolio that steadily supports itself, giving you more options today while still compounding for the future.