How To Make Passive Income with $500

What's up you guys? It's Graham here. So we're going to be talking about something that I have not mentioned for a very long time here on YouTube, and it's a term that either gets people really excited or makes them feel as though they're about to be invited to an MLM seminar at a Best Western hotel, and that is the term passive income. It's the concept that you could essentially just do nothing all day while you sit at home and make money from anywhere in the world.

And it's an interesting idea, to say the least. After all, who wouldn't want to make a lot of money without having to work? Well, the good news is that there are actual legitimate ways to make passive income that don't require a big lump sum investment, that don't involve you being sucked into a multi-level marketing scheme, and don't involve you being sold into a pipe dream. And you could do that with as little as five hundred dollars.

However, I want to be upfront and set some expectations that $500 most likely is not going to end up making you filthy rich to the point where you could quit your job and stay home all day watching YouTube videos anytime soon. But the good news is that once you earn any amount of passive income from a $500 investment, that's going to be enough to get you so excited to want to grow this to something bigger. So, the strategies that you end up learning today should really just become the catalyst that leads you to much bigger numbers in the future.

Anyway, here's where you could start with as little as $500, and everything I'm about to mention is something I myself have done personally. All I ask in return, if you find this helpful in any way, is just to smash the like button for the YouTube algorithm. It helps me out tremendously. And also just promise that one day in the future you're going to give me a thumbs up from your Ferrari because hopefully, this would have worked and you would have made a lot of money. And that's it, that would make me very happy.

So, with that said, let's begin the video. Here, it's really important to understand that when it comes to passive income, there are two very different types that you could generate for yourself. The first one is by investing your money, and the second one is by investing your time. I'll break down and give you options for both of them in this video so don't leave any of you hanging. But because the title of this video is how to make passive income with $500, we're going to be starting with how to invest your money.

The point of this is to get your money working for you so that your money could make you more money, to then make you more money, to then make you more money. Think of it like every one dollar you invest is like sending a little worker off there to find pennies to deposit back in your bank account. Initially, that might not seem like a lot to put a dollar to work just to go and bring you back pennies, but all of a sudden, when you get hundreds and thousands and then hundreds of thousands of workers out there all bringing you back pennies, it begins to add up to a substantial amount.

And then, on top of that, once a penny joins your army, that penny's new job is to go and find other pennies to recruit into your bank account, and that makes you even more money. That's really the basis of investing your money for passive income, and it all begins right here.

1. Invest $500 within an index fund. This is just an investment that covers a wide variety of stocks and markets, and you could buy into that for a very low price. For example, VTSAX is going to cost you under eighty dollars a share, and for that small price, you will own a tiny piece of the entire U.S. equities market. And the good thing with these indexes is that there's an index for pretty much every single market out there.

Here's how you could use that to make some passive income. If you want to invest in the top 500 publicly traded companies in the United States, you can go and invest in SCHB, FXIAX, or VOO, and all of a sudden, you'll get access to 500 companies for one very low cost. And the good news with this fund is that you could make passive income in two different ways. The first is from the stock price going up over time, and the second is going to be through their dividends.

Now, in terms of how much this stock goes up over time, you could see historically, it's averaged about a five to seven percent return adjusted for inflation. Now, obviously, some years you're going to end up making way more money than this, and other years you're going to end up losing some money, but long-term historically, it's always trended upwards. And then, on top of that, like I mentioned, you have a dividend, and in most of these cases, it pays anywhere from 1.3 to 1.8 annually, give or take a bit, which really might not seem like a lot of money initially because with a $500 investment we're only talking about making like five, six, or seven dollars a year.

But when you also consider that the stock price is going up by another five to six percent on top of that, that'll bring your overall return on a $500 investment to about $30 to $40 per year with no work on your end whatsoever. And there are other funds that you can invest in that pay you a much higher dividend if that's what your main focus is. For example, you have high income funds, where the entire fund's purpose is just to pay you out as much money as possible. Like with this one, FIX, they'll give you a 4.7 return on your money for every $500 you invest. That's $23 of passive income for no ongoing work on your end whatsoever. Plus, you get to see the price of the index fund go up over time.

The options don't just end there either. There's an index fund for pretty much any market or industry that you can think of. All you got to do is go to Google, type in your industry, type index fund, and then your brokerage. Here, as long as you do a search for that, you will find an index fund that meets whatever you want. For me personally, I just do VTSAX and SCHB, but I also throw in some international index funds in there as well with SWISSEX, and that one currently pays out a three and a half percent dividend.

And yes, I get it; with $500, it's not like you're going to be making bank, and even if it goes up ten percent a year, fifty dollars in passive income is not life-changing. But all of this really just begins right here, and trust me when I say this, but once you see that first dividend payment being deposited into your bank account for doing absolutely no work whatsoever besides just making the investment, it's addicting, and you're going to want to send even more of your money to work just so that they can make you even more passive income in the future.

Then imagine over time if, for example, you invest $500 a month into an index fund, VTSAX, over 35 years that'll turn into a 1.2 million dollar investment that's going to be bringing you about $22,000 a year in passive income. Plus, the fund itself is going to be going up in value on average by about $60,000 a year. So trust me, it all begins with something small, but it's gonna grow to something substantial over time, and it all begins here today.

Now, second, we have another option if you want to end up making a little bit more passive income and don't mind taking on a little bit more risk, and that would be through buying dividend stocks. Now, for anyone who's unaware of how this works, instead of going and investing your money in an index, which basically just encompasses a whole bunch of everything, you could invest in a specific company, which will typically have a much higher payout when they're doing well. Not to mention some of these companies have been especially hard hit lately due to the illness, so you're buying them already at a discount, and some of the dividends they're paying are substantial.

For example, look at Exxon stock, which is currently paying just above eight percent. That means that you could invest $500 and potentially make $40 a year back in passive income. Simon Property Group is another one that got hit very hard recently because they own malls and retail space, but their dividend is just over eight percent. AT&T is another option which pays just about a seven percent yield.

However, it's really important to realize that companies like this that pay a much higher dividend are a much riskier investment. On top of that, many companies have reduced and altogether suspended their dividend because they just can't afford them anymore. For example, Ford recently suspended their dividends and Wells Fargo reduced theirs. However, you could still absolutely build up a portfolio of dividend stocks that will pay you on a consistent basis with a $500 investment.

As just a few examples here, you have Realty Income or O stock, which pays close to a five percent dividend. Verizon is over four percent, and Johnson and Johnson is just under three percent. Obviously, these are riskier options, and the dividend could be cut down or reduced if the company decides it can't afford them anymore. And the stock price of the actual company itself could end up going down in value, but if things recover, the price of these stocks could equally go up just as much as well. Just understand, as with anything, the more money you could potentially make, the more money you have the potential of losing. And even though a company might have a high dividend, it doesn't guarantee that company is actually going to be doing well.

So just keep that in mind and always invest in safe companies that you know well with strong fundamentals with the intention of holding them long-term. Oh, and also speaking of stocks, the free stock trading app Webull is holding a promotion where they will give you two free stocks when you deposit $100 on the platform, with one of those stocks potentially worth all the way up to $1,400. So if you want two free stocks, you may as well just get them down below in the description because they're free. It helps with the channel, and uh, yeah, they're free.

The third way you could invest $500 to get passive income is to invest in real estate, but not in the way that you think. Instead of going and buying a house for yourself and then dealing with banks and tenants—which usually takes a lot of time and a lot of money—you could invest in a real estate fund known as a REIT, which stands for Real Estate Investment Trust. Think of this one like, instead of going and buying a stock in a company like I just mentioned, you could buy a stock in a real estate portfolio.

See, real estate investment trusts basically just get money from a pool of investors and then buy buildings within a certain category, like medical buildings, shopping centers, senior citizen centers, or residential apartment buildings, and then they pay out a portion of their rental profit as a dividend for you. This means you can own a tiny percentage of a real estate portfolio without any of the headaches of actually managing any real estate. Like, you don't need to deal with any tenants, fix any toilets, or manage anything. You just buy into it, and they'll do the rest.

And also, REITs tend to pay decently well. For example, you have Realty Income Corporation, and they have almost 6,500 properties, including some large tenants like Walgreens, 7-Eleven, FedEx, and so on, and they're paying out a 4.8 percent dividend annually. Or you also have National Health Investors, which is another company that is very hard hit—they pay out a 7.4 percent dividend and focus on senior living and medical buildings.

And then you also have index fund versions of REITs, which basically just go and track all of them. Like, you have Vanguard's version, VNQ, which pays close to a four and a half percent dividend. The downside to doing this, however, is that you cannot leverage your money like you can with real estate, and you don't get all the amazing tax advantages and benefits and depreciation schedules like you do when you invest in real estate in your own name.

Although, the main benefit of doing this is that anyone is able to get exposure to real estate and invest in a big real estate portfolio with a very small investment. You should be able to make $20 to $40 per year in passive income with a $500 investment without managing any tenants whatsoever or fixing any leaky toilets at two o'clock in the morning. I don't know why that's always the first thing people think of when they think landlord—is leaky toilets at two o'clock in the morning, because that's always a thing. I don't know; it's never happened to me. Knock on wood.

There we go. And finally, the fourth way you could make passive income by investing $500 is by paying off any high interest rate debt. And this is probably the point in the video where you're going to see that suggestion, and you're going to be like, "Well, wait a second, Graham. That's not passive income. This video is clickbait!" But seriously, for anyone watching this, if you have a spare $500 lying around and you have any high interest rate debt, paying off that debt is going to be one of the best returns you get by far.

For example, if you have a credit card balance at a 15 percent interest rate, you paying off that credit card balance is the equivalent of you making a 15 percent return on your money immediately with no downside risk. Because all of a sudden now, once that's paid off, you're able to save all of that money on interest. Consider this one like the number one investing decision. If you have an interest rate above five percent that is not a tax write-off—if you have a high interest rate personal loan, auto loan, mortgage, credit card, you name it—pay it down with that $500. Seriously, this is one of the ones you're not going to regret doing.

The less high interest rate debt you have, the less money you're gonna be wasting, the more money you're gonna have left over to invest in anything else. So, pay it down with that $500 bucks. However, if you also have time on your hands and you want to take a very active role in potentially making way more money, then these are some other options.

The first way you can invest your $500 is by going after sign-up bonuses. Now sure, it's not exactly passive because it requires a little bit of work on your end, but it's not that much work, and you could grow your $500 way faster by doing this with pretty much no risk at all. I used to do this all the time when I had nothing better to do, and I still do this every now and then if a good offer comes up. But this is what it is; both banks and credit cards will often give you a bonus for opening up an account with them and meeting a minimum requirement.

And usually these bonuses are anywhere from $50 to $200, and they usually take anywhere from 20 to 30 minutes to complete. Now sometimes it might even take you a little bit longer to go and find the offer because they change very frequently, but I'll give you a template of where to start and a few of the offers that I think right now today are really good to take advantage of.

We're going to be starting with credit cards, and these offers are really a dime a dozen. There are so many of them out there to keep you busy, but these are the ones that I like the most for $500.

First one is to get the Chase Freedom Unlimited, which is a zero dollar annual fee card, and they will give you a $200 bonus when you spend $500 on the card within the first three months. Now, the only trick to doing this correctly is that you got to pay off your credit card in full by the time it's due. And you should never spend money on a credit card that you wouldn't ordinarily have spent anyway; otherwise, you're wasting money.

But assuming you spend $500 normally on groceries, insurance, gas, and stuff like this over a 90-day period, this is a very easy way for you to make an extra $200. So just right there, if you follow those requirements, you'll get nearly a 50 percent return on your money within 90 days, and now you'll have $700 to make even more passive income with.

Enjoy Bank of America is another company that also offers something very similar. They have a no annual fee credit card that's going to be offering you $200 when you spend $1,000 on the card within the first 90 days. So, yes, technically, we are over our $500 limits, but let's be real; most of us anyway normally spend $1,000 every three months on our normal spending. So it makes sense just to put that spending on this credit card, get $200 back, and then that's $200 more that you have to invest.

So just right there between these two, you'll have nearly doubled your money in 90 days, and as long as you pay these off in full, it's going to help boost up your credit score long term. Bank accounts also do this as well. Most banks will offer you a bonus if you sign up and meet some minimum requirements because they want you as a customer, and you could use this to your advantage.

For example, Chase Bank is going to offer you anywhere from $150 to $200 for opening up an account with them. Of course, you do need to keep a minimum balance of $1,500 or have a monthly direct deposit of $500 to avoid the monthly maintenance fee. But assuming you could do that, these bonuses work out really well in your favor.

Be mindful though that sometimes closing down these accounts afterwards can be a bit of a pain, so I only recommend you do this if you actually intend to keep the bank account open long term. So if you don't mind banking with them anyway, you may as well just do a little bit of work and get paid for doing that.

All you got to do to learn these is just Google "best bank account sign up bonuses 2020" or "best credit card signing bonuses 2020," and there's a whole bunch of them that you could go through, and they change about every month or so. The next way to make passive income by investing your time alongside with $500 is by smashing the like button for the YouTube algorithm. Just kidding; I'm talking about making a YouTube channel.

I know this one has become the most cliché easier said than done "how to make money from home" tactics, and everyone is talking about it now, but I still maintain that this could be a phenomenal way to make passive income if you enjoy talking to yourself in a room to a camera and getting frustrated every time iMovie crashes. If you're okay with that, you like doing that, then YouTube can be fantastic.

For example, when I started, I filmed everything on my iPhone and then edited on my computer for free using iMovie. I just made videos talking about my experience as a real estate agent and investing in real estate, and after a few months, I began earning maybe just like a few dollars a day. Then, by the time I started making more money, I just reinvested all of it back into buying a camera and lighting equipment that ended up making me more money.

So I built out an entire studio setup to film in that ended up making me even more money. And now I could afford iced coffee, and now in less than four years, I've gone from making a few dollars a day to sometimes now over $10,000 a day in YouTube ad revenue.

Now, I'm not gonna lie to you and say that you can make thousands of dollars a day passively on YouTube because the YouTube algorithm really rewards an active posting schedule. And without putting in the work, you're not gonna make money, but there is a bit of an element to this where if I were to walk away tomorrow altogether, my videos would still probably be making a few hundred dollars a day passively in ad revenue or as long as YouTube is monetized.

YouTube is very much a career where you get out what you put in. Although when you set it up correctly, this could be positioned in such a way where you can continue making money regardless of how much more you work or regardless of your outside schedule. Think of this one as being very time-consuming and unprofitable upfront, but in the long run, you get to see all of your work pay off later on down the line.

Then from there, once you begin building an audience, there are so many other ways you could begin making passive income like this, that would be by selling a product or a service that doesn't require any further involvement from your end. For example, I created a program called the YouTube Creator Academy, which teaches people how to grow on YouTube, and that fits into this perfectly.

I think my total investment to create this program was a $99 a month Teachable membership and $150 to buy a whiteboard and a few other supplies. But once I got all of that, I spent months of my time creating an outline on how to beat the YouTube algorithm and grow a channel here on YouTube, and then I just mention it every now and then in my videos for anyone who's interested. Yes, this is a bit me pitching it at this point, but it's also a good example of how this works.

All it took for me is a lot of time upfront to create the program, and then once I did that, besides the occasional update, it just runs itself without any further involvement. Anyway, something like this took a lot of work upfront and a lot of trial and error to figure out what works and what doesn't work to get to the point where I would actually feel comfortable selling something. But now at least it runs on its own and will continue to run on its own for the foreseeable future.

Now, don't get the wrong idea. You should never sell a program if you don't actually have the expertise to back up what you do; there had been no way that I would ever be able to sell something if I didn't have the results to back all of that up. But if you're knowledgeable within a certain topic and you feel like you could help further people's education, then maybe this is something you should consider.

Like, if you're a musician, you could post free music lessons here on YouTube and then offer a program for people who want to take something a little bit more advanced. The same thing could also be said for artists or for anyone who's accelerated within their field or anyone who has something of value to share and teach someone else. And $500 is more than enough to film, record, and edit anything you want to create, even less than that if you already have the equipment.

Then from there, under the umbrella of YouTube, or really anything online for that matter, you could expand your passive income through websites, blogs, or other affiliate marketing. This is the practice in which you market someone else's product, and you get paid a commission every time you make a sale. Like, for instance, I have an Amazon affiliate link down below in the description. Anytime someone uses that link to buy anything on there, I get a small commission. Usually, it's just a few cents, but every now and then it's a few dollars, but I gotta say it does add up, and last month I made about $1,500 from this.

Again, that's money I really don't have to think about, and all I do is put the link in the description, and that's all. And you can do something similar by reviewing products you like and use, and then posting those videos on YouTube to try to rank on the first page of that search result. Anytime someone clicks on your video, hopefully they like it, and then use your link to buy it.

Like look at this; there are dozens of reviews for vacuum cleaners, and when you click on them right there, there's an affiliate link. If you buy it, these people have figured out how to make a video once reviewing a product. It comes up first on the searches, and then they'll get paid on the back end. There's so many people on YouTube already doing this, and because there's so many products out there, there's never going to be any shortages of things to review.

Just make them interesting, insightful, educational, and mildly funny, and then if people like it, they're gonna hopefully use that link to buy something. The same thing also applies when I mention Webull in my videos. From my perspective, I enjoy using it. You get two free stocks; I get something back in return, and we all win. And that's the type of marketing that still works in the future as these older videos end up getting more views.

And finally, the last way you could make passive income with $500 is to use that towards creating an online business that you could run passively to generate you money or doing something that doesn't require a lot of your time. For example, I had someone on my second channel, The Graham Stephan Show, who's making up to $50,000 a month writing eBooks on Amazon in his spare time. His total money investment was very little, and he would market the books himself, and now he quit his job, and he's doing that full-time.

I also had another friend who learned how to set up websites, and then he would outsource the work to rank on Google for very niche keywords, and that would make him a few hundred dollars a month. Even though it's not entirely a hundred percent passive, it's still pretty good to spend a few hours a month on something that makes you a few hundred dollars a month. Using your $500 towards something like this would be a fantastic use of your time, and the experience that you get from $500 is going to help you in so many other areas beyond just this.

So, with all that, just remember making passive income with a $500 investment is not going to give you a lot of money initially. It's not going to be like printing Lamborghinis every single month without a significant amount of time or work. However, $500 is enough to get the ball rolling, and then from there, you could end up making way more money down the line. Like I know for myself, anytime I see some people doing these crazy numbers for their businesses, it feels to me like it's a bit out of reach.

So for this video, it's not about getting ahead of ourselves and trying to get some really big numbers off the bat and being totally confused with how to get there. It's all about just dipping in your toes, figuring out what works, starting on a small scale, even if it's you just making $30 or $40 a year from an index fund, because really, I promise you, once you start, it's going to be insanely easier just to grow that number to something larger in the future.

It's going to be slow upfront; it's going to take a lot of time, but in the future, it's going to be worth it if you just start today and smash the like button for the YouTube algorithm. So, with that said, you guys, thank you so much for watching. I really appreciate it. As always, make sure to subscribe and hit the notification bell. Also, feel free to add me on Instagram. I post pretty much daily, so if you want to be a part of it, there, feel free to add me.

There on my second channel, The Graham Stephan Show, I post there every single day I'm not posting here. So if you want to see a brand new video from me every single day, make sure to add yourself to that. And lastly, if you guys want those two free stocks, they're linked down below. Like I mentioned, Webull is going to be giving you two free stocks when you deposit $100 on the platform, with one of the stocks valued all the way up to $1,400. So if you want to get those two free stocks, use that link down below.

Let me know which two free stocks you get. Thank you so much for watching, and until next time.