I'm entering my senior year of college, and will have very minimal, if any, debt upon graduation. From self employment and internships I've saved up a decent amount of money over the past several years. Right now I have ~$40,000 in a 4 year CD that won't mature for a couple more years; the CD earns about 2.15% interest. I have an additional ~$30,000 in a savings account; 7% interest on the first $500 in the account, and very minimal interest on the remaining amount. Additionally, I have ~$2,000 in a checking account, which I use to pay off my credit bill, as I am working on building up a good credit score.

My income for this year will be far less than usual, as I am currently working a part-time unpaid internship. However, I might have the opportunity to work another part-time internship, which is paid. My only income would be interest on the accounts I previously mentioned, self employment income (likely < $10,000), and maybe ~$150 in royalties.

I am looking for a good stream of passive income, without much risk. I've pretty much written off the stock market at this point as I do not want the risk and do not know too much about the market. I just received a limited time offer from my credit union offering a 15-month, 1.15%APY CD. I was considering this, but is it really worth it to make ~$140? Are there other sources of passive income I should consider?


2 Answers 2


As mentioned in the other answer, you can't invest all of your money in one slightly risky place, and to receive a significant return on your investment, you must take on a reasonable amount of risk, and must manage that risk by diversifying your portfolio of investments.

Unfortunately, answers to this question will be somewhat opinion and experience-based.

I have two suggestions, however both involve risk, which you will likely experience in any situation.

Peer to Peer Lending

In my own situation, I've placed a large sum of money into peer-to-peer lending sites, such as LendingClub. LendingClub specifically advertises that 98% of its user base that invests in 100 notes or more of relatively equal size receive positive returns, and I'm sure you'll see similar statements in other similarly established vendors in this area. Historical averages in this industry can be between 5-7%, you may be able to perform above or below this average.

The returns on peer to peer lending investments are paid out fairly frequently, as each loan you invest in on the site pays back into your account every time the recipient of the loan makes a payment.

If you invest in small amounts / fractions of several hundred loans, you're receiving several small payments throughout the month on various dates. You can withdraw any money you have received back that hasn't been invested, or money you have in the account that hasn't been invested, at any time for personal spending.

However, this involves various risks, which have to be considered (Such as someone you've loaned money to on the site defaulting).

Rental Property / Property itself

I'm also considering purchasing a very cheap home, and renting it out to tenants for passive income. This is something I would consider a possibility for you.

On this front, you have the savings to do the same. It would be possible for you to afford the 20% downpayment on a very low cost home (Say, $100,000 or less up to $200,000 depending on your area), but you'd need to be able to pay for the monthly mortgage payment until you had a tenant, and would need to be able to afford any on-going maintenance, however ideally you'd factor that into the amount you charged tenants. You could very likely get a mortgage for a place, and have a tenant that pays you rent that exceeds the amount you pay for the mortgage and any maintenance costs, earning you a profit and therefore passive income.

However, rental properties involve risks in that you might have trouble finding tenants or keeping tenants or keeping the property in good shape, and it's possible the property value could decrease.

One could also generalize that property is a somewhat 'safe' investment, in that property values tend to increase over time, and while you may not significantly over-run inflation's increase, you may be able to get more value out of the property by renting it out in the mean time.

Additional Note on Credit

You mention you have a credit card payment that you're making, to build credit.

I'd like to place here, for your reference, that you do not need to carry a balance to build credit.

Having active accounts and ensuring you don't miss payments builds your history.

To be more specific, your history is based off of many different aspects, such as:

  • The average age of your open credit accounts
  • The utilization ratio of your credit accounts (% of your limit you're using)
  • Number of accounts opened (Total, some lenders are concerned with number opened within X period of time)
  • % of missed payments
  • Judgements, bankruptcies, etc

I'm sure I missed a couple of things on this front, you should be able to find this information with some research. Wanted to make sure you weren't carrying a balance simply due to the common myth that you must do so to build credit.


The items mentioned above are suggestions, but whatever you choose to invest in, you should carefully spread out / diversify your portfolio across a variety of different areas.

It would not be advisable to stick to just one investment method (Say, either of the two above) and not also invest in stocks / bonds or other types of investments as well.

You can certainly decide what percentage of your portfolio you want to invest in different areas (for instance X% of assets in Stocks/bonds, Y% in real-estate, etc), but it does make the most sense to not have all of your eggs in one basket.

  • 1
    Are you sure about your 17% return on P2P lending? I've had money at prosper for a number of years now and am averaging around 8.5% after defaults, and this year is looking more like low 7s, though admittedly I'm weighted more heavily on lower risk borrowers.
    – quid
    Commented Jun 6, 2017 at 17:38
  • I have not been using prosper. Results can vary significantly. Specifically, though, after a year and a half investing at lending-club I have had an annual return of about 17% (which varies slightly for me based on how long it's been since note(s) have defaulted), investing exclusively in high interest, low-grade notes that return large interest sums but also default a bit more often.
    – schizoid04
    Commented Jun 6, 2017 at 17:43
  • Right, I think that's an important nuance you should include in your answer. My account is old enough that I've had a number of loans run their full 3 or 5 year term, but I'm not exclusively in low-grade notes, I'm spread along the spectrum, and it is very very rare for me to have a negative month.
    – quid
    Commented Jun 6, 2017 at 17:46
  • I think it might be better for me to remove the specific result that I've received entirely, given that it changes for different people.
    – schizoid04
    Commented Jun 6, 2017 at 18:49
  • @quid To be fair I've also been increasing my investment and consistently investing in new notes, keeping my average age of notes at a low number. That likely has an impact.
    – schizoid04
    Commented Jun 6, 2017 at 18:54

There's no such thing as true "passive income." You are being paid the risk free rate to delay consumption (i.e., the super low rate you are getting on savings accounts and CDs) and a higher rate to bear risk.

You will not find truly risk-free investments that earn more than the types of investments you have been looking at...most likely you will not keep up with inflation in risk-free investments.

For a person who is very risk averse but wants to make a little more money than the risk-free rate, the solution is not to invest completely in slightly risky things. Instead the best thing you can do is invest partially in a fully diversified portfolio. A diversified portfolio (containing stocks, bonds, etc) will earn you the most return for the given amount of risk. If you want very little risk, put very little in that portfolio and keep the rest in your CDs.

Put 90% of your money in a CD or something and the other 10% in stocks/bonds. Or choose a different percentage.

You can also buy real assets, like real estate, but you will find yourself taking a different type of risk and doing a different type of work with those assets.

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