Make Your Money Work for You With These 3 Passive Income Streams

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There's a lot of weird information on the internet about a lot of stuff. But boy, does it love get-rich-quick schemes that promise you'll make a bunch of money while doing almost nothing. The truth, of course, is a lot different. What you end up with is a system that doesn't work, an extra job that wastes your precious time, or a con job that just sucks in your money like a reverse firehose.

Fortunately, there are some legitimate passive income streams. You'll need a brokerage account and some money to put to work. And you'll need to put in a bit of research at the start. But once you've made your selections, they will pay you indefinitely. Here are three to consider.

1. Real estate investment trusts

Real estate investment trusts (REITs) are companies that own portfolios of different kinds of real estate, often around a singular industry or goal. For example, you might have a REIT that only owns industrial buildings. Or one that focuses on apartments. Or one that rents different types of biotech company units.

REITs are either private or publicly traded. I don't recommend getting into private REITs unless you already have a lot of experience with publicly traded ones. The public ones have stiff financial disclosure rules and a lot of regulations on how they must invest their money and disburse earnings to investors. For example, 90% of taxable income has to go back to shareholders as dividends.

The dividend of a REIT is its crowning glory. All stocks are an investment in a business, but with REITs, you get paid real money based on what you put in and how well the business performs. That's the dividend, which you can then use however you wish, without selling your stocks.

No matter what kind of real estate you're interested in, there's a REIT for you. You'll find dividend yields, the ratio of the dividend compared to the stock's price, from about 4% to above 10%, though I have a hard time trusting anything with a yield above about 6% or 7%.

If, say, you choose a REIT with a 5% dividend yield, that means that you're earning $0.05 per $100 invested in dividends yearly. Plus as an owner of a stock, you may benefit from the stocks' appreciation over time. So, when you go to sell your investment, you can also reap a second reward.

This is why I love REITs.

2. Exchange traded funds

If you want to invest in the stock market, but don't really have any particular stocks picked out, an exchange-traded fund (ETF) might be the answer. Unlike picking individual stocks, ETFs let you choose a basket of stocks that represent different things. That might be a whole industry such as aerospace. Or a country -- looking for an all-Canadian ETF, eh? It might even be a business philosophy, for example, companies with a solid focus on innovation.

However you want to slice up the business world, you'll find an ETF that's pre-cut and ready to go.

ETFs trade just like stocks. But unlike stocks, they represent several different companies, and so the returns can vary pretty widely based on what you choose. ETFs also carry fees, which vary depending on how they're managed and where you buy them. If you choose your own ETFs and buy them through a self-service brokerage account, you'll generally get the best deal on fees. But if you lack experience with investing in general, it may be worthwhile to pay a broker to do this research for you.

ETFs work just like stocks, in that if you hold on to them they can potentially increase in value, and many will pay dividends if all goes well. Dividends are often paid monthly, but can be paid at other intervals. This is largely based on the stocks within the ETF. It's very important to read the documentation with your ETF before committing.

3. Index funds

Index funds follow the rise and fall of particular stock indexes, like the Nasdaq, the S&P 500, or even the Russell 2000. Like ETFs, there is a wide range of index funds to choose from. In fact, index funds are sometimes considered a type of ETF.

People who invest in individual stocks, like myself, spend a lot of time reading financials and learning about the companies they're invested in. If that's not for you, choosing an index fund can help you diversify your portfolio without having to do as much research. You can optimize your long-term returns -- and you don't have to pick a particular stock or an industry.

So, let's say you want to invest in a tech-heavy index. Well, there's nothing better for that than the Nasdaq, so grab the Nasdaq index fund that makes your heart swell with joy. You won't necessarily get a slice of every stock in the Nasdaq, depending on which fund you choose, but the prospectus will outline what's included.

Index funds also often pay dividends. The payments will vary a lot based on what stocks are being used to set the index, and how they perform. They may pay monthly or quarterly, so check your index fund prospectus before committing.

Income-producing investments are easy peasy

Your passive income streams should be that: passive. If you have to do a bunch of regular work to make them keep performing, you've got a job, not a passive income machine. But, REITs, ETFs, and index funds make passive income as simple as set and forget.

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