Looking For Ways To Make More Money? Here Are 6 Ways You Can Make Passive Income In Singapore (2022 Update)

Written by Shannon Wong on January 19, 2022

Anyone who is looking to be financially free in the future would have heard of passive income.

Most people imagine that passive income is just money that they can generate without necessarily doing anything. What they forget is that they have to build a right financial foundation first, which will then allow them to have a reliable system of making money.

It takes wisdom to create sources of passive income. In fact, before it can come in large enough amounts that one can sit back and relax and wait for the money to come in, he or she will need to work hard to acquire the right assets. They need to have enough money and emergency funds before beginning their investment journey. With the high cost of living in Singapore and the growing inflation, almost every Singaporean is thinking of ways to earn passive income.

1AP Capital has observed a growing interest in investments among individuals and specially designed financial products that can help all clients. These include low interest personal loans, speedy fast cash loans and home renovation loans.

After research, here are the 6 common sources of passive income in Singapore:

1. Stocks

To ensure that one can invest in stocks that will throw off an income in the form of dividends, it is important to first research on businesses that are stable. Usually, these are telcos and retail REITs. They make more sense to investors because they are not easily affected by market cycles. That said, one will have to really build up their investment over time, which takes prudence and discipline.

An example is investing $1 million in the stock market.ย  It will take a lot of time to do so, but with a 4% dividend, the investor is able to make a decent $40,000 a year in dividends. As he or she continues to compound their dividends, the returns can become a lot higher. Of course, one doesnโ€™t always have to start with $1 million. They can always start with a smaller amount for stock investment.

Dividend stocks have the following major advantages:

  • No tax. Since dividends are paid once the company has paid its corporate tax, dividends are non-taxable. This is because Singapore has a one tier tax system. This means that one has tax advantage and over time, can create a lot of non-taxable dividend income.
  • Faster returns. Dividends are a faster way of seeing money come into oneโ€™s bank account than capital gains. Impatient investors will often be discouraged by having to wait a long time to see any capital gains.

2. Bonds

There are government bonds and corporate bonds. A government bond would be the SSB, Singapore Savings Bond which is giving a slightly better interest rate today. Corporate bonds are usually offered to institutional investors since they require a high investment of even around $250,000. Retail bonds tend to be an exception. Government bonds are usually risk free and one can invest smaller amounts. Do note that smaller risks will naturally bring smaller returns.

There are several advantages of investing in bonds as follows:

  • Principal guarantee. Whereas stocks do not guarantee that the principal will be returned to the investor should things not go as anticipated, bonds do. This is not to say that bonds are not volatile. Usually, bond prices fluctuate up and down before they mature, but the amount invested will be paid back after it matures. In addition, one can purchase bonds at half their face value when purchasing through the secondary market, and still be able to sell them at 100% once they mature.
  • When profit sharing, bond holders will be paid before shareholders are.
  • Like dividends, stocks are non-taxable in Singapore.

With bonds, there are specific disadvantages as well.

  • Fixed income. Whereas stocks can enjoy growing dividends and even generate appreciation of capital gains, bonds offer a fixed income.
  • Low yield. Bonds usually yield 3% interest which is considered low. The governmentโ€™s SSB has interest rates of 1.95% p.a. to 2.55% p.a. which varies yearly.
  • Few options. Bonds have very few options, since there are less than 20 corporate bonds listed in the Singapore stock market.

3. Investing In Real Estate

Leveraging loans is what makes this investment so lucrative. One can purchase a house or flat with 20% down and a loan to cover the remaining 80%. If one rents out the home for a good rate and still has positive cash flow once they have deducted costs and the loan repayment, this becomes a good source of passive income.

For those who may already have a house and needs money for financial emergencies, renting out a room can bring in some passive income as well.ย  This is common practice in Singapore by those who are looking for extra income to make ends meet, but it can be used as a means to earn money that can go into savings and then into investments.

4. Royalties

This is income that come from ones intellectual content or property such as movies, music, and books. Usually, the amount one earns is based on how much their content sells or intellectual property sells. This is not the easiest way to make money, but if he or she happens to have a chart topping song, a best seller, or block buster movie, the person can earn a decent amount of money every year.

5. Peer-to-peer Lending

In Singapore, this type of lending is gaining ground quickly. Basically, the lender pools his or her money with other like-minded people and loan the money to companies that need the money. The companies are usually startups and SMEs who may not be able to qualify for traditional loans. The best way to do this is to work closely with peer to peer lending platforms that will have already screened the companies.

These companies will often provide all the necessary information about their business and their company, including their business plan and financial projections. One then reviews the documents and makes a decision on which company to loan to. Some of the platforms offer a 2.2% – 2.3% interest every month, while others offer 8.88% – 20% every year. This can be a great addition to oneโ€™s passive income portfolio.

6. Annuities

These come into play once the investor gets to retirement age. One must pay out money to an insurance company in their active years and then when they go into retirement, they will be getting a fixed payout on a regular basis from the insurer. As the money is paid out from month to month, he or she is sure of income.

One of the best things that anyone can do is to start investing in such products from a young age. Savings plans, health plans, life plans and more. It allows for more years of compounding interest to grow that nest substantially. This is a product for people who are conservative in investment, or those who do not have enough knowledge in investing to go out and risk their money on other more volatile investments. There are definitely less risks.

The one thing to note is that the investor cannot surrender their policy midway. If he or she does, it means that he will be foregoing quite a large amount of money, and this can derail his or her retirement plans quite a bit.

In Conclusion

The effort that one needs to put into creating a means of passive income must be deliberate. This means that he or she must work to save the money and then invest it to gain the necessary returns. This process takes time. This is true for stocks and bonds, as well as for real estate investing where often, he or she will be required to put up a down payment. It often calls for financial discipline, sacrifice, and good financial management skills. Without these, it will not be possible to create sources of passive income.

When it comes to royalties, one must leverage their creativity and innovation to come up with ideas that will result in passive income. They can include a franchise, a product, a system, and so much more. It is amazing what the mind can come up with. If it resonates with the target audience, success can be achieved over time.

For investments, one must have enough capital first to begin with. If you require more funds or is in debt, 1AP Capital can help you. 1AP Capital is a licensed moneylender in Singapore that offers a wide range of financial solutions at affordable rates.


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