What is passive income?
Passive income is money you can earn without working a traditional job. This is the opposite of active or earned income, which is generally defined as income received from working at a job or as a <a s not to say passive income is easy money — in fact, the opposite can be true. Most ways to generate passive income require a large upfront investment, and the income part comes later. But once you've made that initial investment, passive income can pay off for years to come.
To help you compare your options, our editors have compiled a list of nine investing-based passive income ideas. We’ve included the effort level and return potential for each strategy, plus who they might work best for.
9 ways to earn passive income through investing
1. High-yield savings account (HYSA)
Best for:Most people. While it may not be the most lucrative passive income strategy, a HYSA offers an easy, low-risk way to earn interest on cash you want to keep accessible.
One of the easiest ways to earn passive income is to park some of your money in a high-yield savings account. These accounts work like a standard savings account, but with one very important difference: you can earn interest on the money deposited — and at a rate that is typically much higher than the national average.
While HYSAs aren’t designed to produce outsized returns, they can yield from a couple of dollars to hundreds or even thousands of dollars a year, depending on how much money you’re holding in the account. Interest rates (also known as APYs) vary by bank and can change based on the current economic climate, so it pays to shop around for the right fit.
High-yield savings accounts at a glance
Effort:Low. No ongoing management beyond opening and funding the account, then occasionally monitoring the rate to see if a better deal becomes available.
Return potential: At the time of writing, competitive rates generally range from about 3.5% to 4%.
»See what you can earn:Compare high-yield savings accounts
2. Certificates of deposit (CDs)
Best for:People who don’t need immediate access to the money they deposit but would eventually like to use their earnings toward short-term savings goals.
A certificate of deposit is a type of savings account that pays you a fixed interest rate (either monthly or annually) in exchange for locking up your money for a set period of time. Unlike high-yield savings accounts, a CD’s interest rate won’t change during the term.
The tradeoff here is limited flexibility, as you’ll usually pay an early withdrawal penalty if you access your funds before the CD matures. Terms for CDs can range from 6 months to 5-plus years.
Like high-yield savings accounts, CDs won’t produce larger-than-life returns, but if you have cash you won’t need for a while, it’s a low-risk way to grow your savings.
CDs accounts at a glance
Effort: Low. Setting up a CD account can take less than 20 minutes. No ongoing maintenance other than waiting for it to mature.
Return potential: At the time of writing, the highest CD rate on our list is 4.3%. If you invested $10,000 in a one-year CD at that rate, you’d earn $430 in interest.
»See what providers are offering now:Compare CD rates and terms
3. Bonds and bond index funds
Best for:Investors seeking steady income and diversification.
Bonds are a way for investors to lend money to companies — as well as federal, state and local governments — and collect interest income. They are considered a safer investment than stocks, but also generally earn a lower return on your investment. You can either invest directly in a bond or in a bond fund, which is a collection of bonds, through a taxable brokerage account.
Nerdy Tip: If you have a 401(k), chances are part of your portfolio is already invested in bond funds. As you get closer to retirement, portfolios often shift toward a higher percentage of bonds to help reduce risk and preserve gains.
Bonds at a glance
Effort: Low. Selecting individual bonds or funds, purchasing through a brokerage and holding them while collecting interest income.
Return potential: Depends on the bond you buy and the amount of time you hold it for. So far in 2026, the average yield for a U.S. Treasury security with a 10-year constant maturity is about 4.3%.
4.
Dividend funds at a glance
Effort: Moderate. Choosing a fund, investing in it, and periodically reviewing performance and payout consistency.
Return potential: More stable than individual stocks. But similar to dividend stocks, dividend funds vary in their payouts. At the time of writing, the highest yield on our high-dividend fund listis close to 9%.
6. Real estate investment trusts (REITs)
Best for: Investors who want real estate exposure without owning property; retirees.
If you want to build passive income from real estate without the fuss and bother — not to mention the hefty down payment — of buying and managing properties yourself, real estate investment trusts (REITs) may be the answer.
Similar to mutual funds, REITs are companies that own commercial real estate, such as office buildings, retail spaces, apartments and hotels. When you buy a share, you are investing in them rather than purchasing them outright.
REITS tend to pay high dividends, but they vary in complexity and availability. New investors may want to stick to publicly traded REITs, which you can purchase through an online broker and are publicly traded on stock exchanges. You can also diversify your real estate holdings by investing in mutual funds or ETFs that track multiple REITs.
REITs at a glance
Effort: Moderate. Researching REITs or REIT funds, purchasing shares and monitoring performance and dividend payments.
Effort: Moderate. Choosing a fund, investing in it, and periodically reviewing performance and payout consistency.
Return potential: More stable than individual stocks. But similar to dividend stocks, dividend funds vary in their payouts. At the time of writing, the highest yield on our high-dividend fund listis close to 9%.
Effort: Moderate. Researching REITs or REIT funds, purchasing shares and monitoring performance and dividend payments.
