Income Generating Assets You Should Know

October 26, 2022

Diversified income streams can make it so that while uncontrollable financial shifts may affect some portions of your income, other income streams may be less affected. This can limit the risk to your finances. 

What Are Income Generating Assets?  

Income-generating assets are commonly known as financial resources that can produce a recurring profit over time. This makes having income-generating assets an important part of a well-diversified portfolio

For many people, income-generating asset revenue is a great way of adding to their regular income to save for important life events and help grow their wealth.

Dividend Stocks and Equities

Depending on your time horizon, investing in stocks can involve varying degrees of risk and reward. However, after determining which companies show potential for growth, the value of its stock could be projected to grow over time.

With stocks, you essentially own a share of the company, but the benefit of being a shareholder is that you do not need to be involved in the day-to-day decision-making and management of that business.

Some stocks even pay regular dividends, which can make this strategy an appealing option. Dividends are stocks that remit regular profits to shareholders at a rate decided upon by the board of directors. Usually, these are quarterly payments and come in the form of cash or reinvested shares.

Stocks can be purchased through your financial advisor, at the bank, or online using a stockbroker app.

It’s best to remember that stocks are a long-term strategy because market fluctuations can create value swings. This volatility can cause some anxiety, but is completely normal and even expected.

Rental and Vacation Properties

While you may own your primary residence, it isn’t an income-generating asset. Of course, your real estate can generate an increase in value through appreciation, but it’s not a cash generator. The only way to access that income is by selling the property or taking equity out through a loan. 

However, rental and vacation properties can generate income. Rental properties with long-term tenants provide consistency, albeit at lower potential returns compared to short-term and vacation rentals.

Vacation properties can require more time and attention. The unit will need to be furnished at the outset, and require regular cleanings between guests — which can amount to several times a week. If you don’t have the time to do this yourself, you may have to hire a cleaning service, which can eat away at profits. 

Having an income property means someone else is paying down your mortgage and possibly even providing you a little extra income on top of that. If the rental is properly managed, it can be a relatively reliable revenue generator.

The downside is that owning and operating a rental or vacation property is a lot of work, sometimes the equivalent of a part-time job. So while there will probably be income and appreciation, as with any property, renting is a lot of work and responsibility. Moreover, if something goes wrong, such as a pandemic, vacation rental operators can quickly find themselves over-extended


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As an alternative to residential and vacation real estate, land can offer the same benefits (including a low correlation to the stock market) without relying on a thriving tourism sector.

Historically, farmland has been a major income-generating asset of the upper classes since the beginning of land ownership.

Since not everyone has the upfront cash to buy land, there are publicly traded options as well as crowdsourcing options.. However, these options may have high barriers to entry, with a minimum buy-in, with some such as FarmTogether even requiring a net worth of over $1 million or a high annual income for some investments.

Real Estate Investment Trusts

An alternative to administering your own real estate rentals is joining a Real Estate Investment Trust (REIT).

A REIT is a company that owns and operates real estate to generate income for shareholders. Generally, REITs involve larger acquisitions such as multi-story buildings, office spaces, malls and so on.

REITs invest in real estate for long-term, perpetual income generation, meaning that the goal is not to generate profits through buying and selling but through holding, leasing and renting the properties.

The downside to investing in a REIT is that it’s a highly illiquid investment. If you need to cash out quickly, you or the REIT will have to wait to find a buyer. As well, there is sometimes a high minimum investment requirement. However, there are also publicly traded REITs.

Investing in Business Entrepreneurs

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As an alternative to real estate, investing in business and entrepreneurship can also be a great entry point in income-generating assets, although a substantial source of initial capital may be required.

There are quite a few ways to approach investing in entrepreneurship. Some investors get in on the ground floor by investing in the search fund or the initial acquisition. This is where acquisition entrepreneurs search for and acquire a new business, providing investors the opportunity for step-ups or preferential rates. It’s equally possible to get in at any level through solid partnerships.

Peer-to-Peer Lending

Peer-to-peer lending is exactly what it sounds like: through a platform like LendingClub, investors lend money to borrowers who repay the loan with interest.

Online lending platforms offer loans to hundreds of borrowers simultaneously with loans at different interest rates so that the high-risk loans at high-interest rates are balanced with lower-risk, lower-return loans.

The risk with peer-to-peer lending is that if loss rates go too high (through borrowers defaulting), then the return for investors can go below the expected range, yielding a less-than-ideal long-term forecast.

Royalties and Shares of Art

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For those who are less interested in stocks, real estate, or money lending, there are options with a little more cultural significance.

Platforms exist where individuals can own a share of royalty or invest in a piece of art. Investors may receive a return or royalty when the cultural artifact is bought, borrowed, or sold. While pop culture royalties can be more volatile (and vary with popular taste), investing in shares of established works of art may provide more stability.

The downside to royalties is that seller fees can be high for those looking to exit in a hurry, but likewise, this is the case for most income-generating assets. The most noteworthy benefit is that art is not necessarily directly tied to the performance of global financial markets, making it another option for diversification.

The Bottom Line

Every investor can begin building additional wealth by investing in income-generating assets. There are numerous examples of income-generating assets that investors can choose from to get a chance to yield returns. 

Income-generating assets can be a useful portfolio diversifier as well as a potential source of cash flow. By minding your due diligence and choosing the right income-producing assets, you may get closer to your financial goals

Masterworks is a fintech company democratizing the art market. Our investors are able to fractionally invest in $1mn+ works of art by some of the world's most famous and sought-after artists.