There's nothing wrong with working hard to continuously boost your income. In fact, many people these days are holding down not just full-time jobs but also side hustles to meet their financial goals.
That's certainly commendable. But there may be a better way for you to boost your income -- one that doesn't require you to do all that work.
I'm not pulling your leg. With the right strategy, you can set yourself up to earn a lot of money in passive income -- income generated by your investment portfolio. In fact, there's one specific investment that lends nicely to passive income, and it's one worth dabbling in at as early an age as possible.
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Why REITs are a dream for passive income enthusiasts
Many stocks have the potential to gain value over time. But that doesn't mean they'll continuously pay you money.
To get that benefit, you need to load your portfolio with stocks that pay dividends. And REITs are a great choice in that regard.
Short for real estate investment trusts, REITs are companies that make money by operating different types of properties. REITs enjoy special tax benefits, but to maintain their status, they're required to give out 90% of their taxable income to shareholders as dividends. And because of this rule, you'll often find that REITs pay higher dividends than your typical stock.
Now here's the beauty of dividends: Since they're extra money -- not money coming from your paycheck -- you can cash them out as they come in and spend them as you please. But a better bet may be to reinvest your dividends continuously to grow even more wealth in your portfolio.
Which REITs are right for you?
To tell you to go out and buy REITs would effectively be the same advice as "go buy some stocks" -- not all that helpful. But worry not -- I wouldn't do that to you. Instead, I'm going to recommend a few specific REIT segments to look at.
First, dig into industrial REITs, which are businesses that operate warehouses and distribution centers. Over the past few years, consumers have increasingly been making purchases online. And that's caused a surge in demand for industrial space.
Now that consumers are in the habit of buying goods online, it's unlikely that they'll revert to their former ways anytime soon. In-person shopping is less convenient, and gas currently costs a fortune. That alone makes the case to point-and-click one's way to a purchase rather than visit a store.
And also, there's a pesky virus circulating to worry about, with a new variant at play. That alone could keep shoppers out of stores for many more months, if not years, to come. As such, industrial space is likely to remain high in demand for a long time, making the companies that own that space a good buy.
Another REIT sector I want to call out is residential REITs. If you've been following real estate news, you may be aware that the housing market is just bonkers these days. Not only are home prices sky-high, but mortgage rates have gotten alarmingly expensive, making it more difficult than usual for buyers to purchase a home.
As such, the demand for rentals is huge right now, which makes residential REITs -- companies that own apartment complexes and such -- a strong buy. Plus, even in the worst of economic times, people will always need a place to live. So even if a recession hits and the housing market cools off, it's fair to assume that residential REITs will continue to enjoy plenty of revenue.
Now these are just a couple of REIT sectors worth looking at. There are others you can definitely do your research on to see what's best for you. But all told, if your goal is to generate lots of income without having to put in the legwork (other than some initial research), REITs are really a solid bet. And the sooner you start investing in them, the more passive income you stand to enjoy.
