Passive income and how to earn it

As Fundación MAPFRE highlights in its glossary, passive income refers to earnings that don’t require a direct investment of your time — in other words, income that is generated without you having to actively work for it. This makes passive income an ideal way to earn extra cash.

There are many ways to achieve passive income, and here are some of the most common:

Investment

This is probably the most passive form of income. No matter how much you have available, putting it to work as soon as possible is essential to benefit from compound interest—that is, reinvesting the interest earned to build a growing snowball effect. There are many types of assets to invest in, but for individual investors, the best route is often through investment funds. These provide professional and diversified management of your investments.

That said, investing also carries risks, and in the beginning, you may make classic mistakes such as emotional decision-making or failing to think long-term. Fortunately, with MAPFRE, you’re covered. We have a specialized advisory unit, MAPFRE Gestión Patrimonial, to help you set clear financial goals and achieve them.

Dividends

This form of passive income is closely linked to the previous one. A dividend is a share of a company’s profits that is paid to its shareholders, offering an additional way to profit from your stock market investments. In fact, dividend yield is one of the most common metrics used to compare companies, and the insurance industry tends to perform well in this area. For example, MAPFRE offers a dividend yield of 6.9%, and the strong results from 2024 have allowed them to increase the total dividend for the year to 16 cents per share, a 6.7% rise.

Fortunately, the Spanish stock market is one of the highest dividend-paying markets, especially when compared to others like the U.S. stock market, which traditionally distributes fewer profits.

Use your hobbies!

Your hobbies can become one of the easiest ways to generate passive income: do something you enjoy, and by selling it, you’ll earn a little extra money. Collecting items also falls under this category. If you enjoy collecting watches, comics, or keychains, selling them could help you move closer to financial stability. However, the profitability of this depends on market demand.

On the other hand, even if the items aren’t particularly unique, you can sell things you no longer use, such as clothes that no longer fit or books you’ve already read. Both categories tend to have a strong second-hand market.

Develop your personal brand

Building a personal brand can be an excellent strategy to earn extra income through creating a website, launching a newsletter, or starting a podcast, among other options. The key here is finding the broadest audience possible, which also opens the door to affiliate marketing — selling products through referral links, for example.

However, this option is not entirely passive, as you’ll need to put in work to sell, write newsletters, or edit videos and audio content.

Selling digital products

If you’re skilled with professional tools like Adobe, you can create and sell digital products such as templates, online courses, photos, or even music. This is similar to the previous option, as you’ll need to invest effort upfront to create the products, but once they’re on the market, you’ll only need to maintain them. Each sale generates passive income.

Keep in mind, however, that once you reach a certain threshold, taxes will have to be paid.

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