Highlights summary

  • If like most people your salary is not sufficient enough to help you reach certain financial goals, you must find other streams of revenue that could lead to your financial freedom.
  • Passive income is income that requires no effort from your end to earn and maintain and serves as a good means of making money at times, literally, while you sleep.
  • Yet, passive income does call for planning, while you will need to make an upfront investment and to dedicate some time in order to see your efforts take off.
  • Investing in dividend stocks, bonds and income funds are all considered excellent sources of passive income.
  • You can choose to do it alone or if you need help to get started with setting up, you may get in touch with Calamatta Cuschieri and our team of expert financial advisors.

For most of us, our 9-5 job is what pays the bills and all other necessities, but often, it does not stretch enough to help us reach other financial goals like saving up for retirement or building wealth, while more often than not, we tire of living in a pressure cooker environment trying to make ends meet.

The idea of making money while you sleep may be a bit of a cliché and a pipe dream to most, however, making money with little to no effort from you part is not only possible, but quite attainable. Known as passive income, it is a smart strategy to grow your money and maximise your resources, as well as live life in your own terms.

From reducing your stress, anxiety and fear for the future to enabling you to do the things you love rather than what pays the bills and providing a platform for financial stability and growth, passive income can fuel your financial goals. At the same time, it gives you the freedom of time since you’re less shackled by the need to earn just to meet your monthly financial obligations.

So what is passive income?

Passive income is a source of revenue you do not need to work for, whereas when some effort is needed to grow this, it is known as progressive passive income. In contrast, active income is any earned income an individual receives like wages, self-employment income or material participation in a corporation or partnership.

Examples of passive income include cash flows from property rental as well as interest from owning investments or financial assets. Having said that, income generated from trade or business activities but which an individual does not actively participate in is also considered as passive income. The same applies to limited partnerships and royalties, whereby payments are made for the right to use the licensor’s intellectual property. These could be things like books, music and video to name a few.

How passive is passive income?

Setting up this process is not as simple as it may sound. A passive income is usually highly sought after but there is an important element to it that is often overlooked. These income streams do require planning to generate money. This may involve an upfront investment, as well as sufficient nurturing to see your efforts take off. But after investing some time and money to it, it will eventually be able to maintain itself and bring you a steady and consistent revenue while you put your feet up and enjoy life.

What it takes to build enough passive income

Save as much as possible

Passive income starts with saving since it requires an initial investment. Placing your hard-earned money in a savings account at your preferred bank so that you can earn interest used to be the order of the day. But in today’s low interest climate, this might not be the ideal option when even if you have hundreds of thousands of euros saved, your traditional brick-and-mortar bank will give you very little in return.

Investing in a flexible savings plans without restrictions may be the optimal option and a safe passive income stream. A tax-efficient way of compounding interest, typically, a savings plan offers higher rates than your bank would, as well as the flexibility to choose how much you want to save each month. One such option is the CC Funds Savings Plan which can help you reach your financial goals with as little as €40 per month. On the other hand, if you’re looking for an effective means of saving money which you can use during retirement, our retirement planning and pension schemes are specifically designed to help reach your objectives and maintain your standard of living in the later years of life.

Alternatively, you can opt to place funds in the market in small amounts and over a longer period of time by investing in bonds or equities, making it a continual process of investing capital into a specific goal. Known as pound-cost averaging or drip-feeding, since the price will likely vary each time one of the periodic investments is made, investing becomes more manageable, while you can reduce any risks that may arise from volatile investments.

But remember that at the heart of every savings plans is the appropriate planning and budgeting. Have a look at why having a financial plan is important and here is how wealth management can help grow your money.

Start working on your passive income as soon as possible

Building a substantial amount of passive income takes time – think of it as a marathon rather than a sprint. This means that in all likelihood you will not be able to live off it right away, so the earlier you begin working towards this goal the better and ideally, you should have a solid plan and strategy in place to stay on course.

Calculate how much passive income you need

Having a specific passive income goal in mind is crucial otherwise you risk losing your motivation. So, if for instance, you are looking to cover your basic living expenses with a passive income, calculate how much money you need for food, shelter, transportation and perhaps clothing. Then divide this figure with your expected rate of return to estimate how much capital you need to save.

Ideas to get your passive income going

Whether you invest in stocks, equity funds, bonds or a mix of all, if you’re striving for a brighter financial future, there are a myriad of ways to create several different streams of income. Here are some ideas to consider.

Dividend stocks

One of the simplest ways to generate passive income and amass a nice residual income over time is to invest in dividend stocks. As public companies generate profits, a portion of these earnings are funneled back to investors in the form of dividends. By investing in dividend stocks, you become a minority owner in a business, but have no decision-making powers. Payments are made at regular intervals and it is up to you to decide whether you would like to pocket the cash or reinvest the money.

With so many different stocks to choose from, you may feel overwhelmed with what is available out there, but it’s best to explore your options thoroughly and make sure to go through each company’s website and financial statements before making a choice. One option you may want to consider is going with exchange-traded funds (ETFs) which hold a variety of assets like stocks, commodities and bonds but are traded like stocks and which are particularly adept for novice investors. Highly liquid, easy to understand and not particularly expensive to purchase, ETFs can have good potential returns.

Looking to invest in stocks? Have a look at CC’s watch list.


Unlike buying an ownership stake in a company through stocks, bonds are a way for investors to lend money to companies or the government and collect interest income. Bonds can be bought in a variety of maturity time frames, however, buying shorter-term bonds means that you’ll get your money back sooner, while longer-term bonds will get you a higher interest rate paid on the loan.

Providing interest payments usually twice a year, this type of investment is also known as fixed-income since investors receive fixed interest payments. Investors receive the principal amount back once the loan matures, while they require almost no time from your end to manage them, which means that they provide a high passive income potential. In effect, unlike stocks in which investors are constantly compelled to buy and sell, it is more common to hold bond investments to maturity. In addition, thanks to their lower volatility, bonds are a safe option compared to other assets and whereas the underlying price of the bond may increase or decrease daily, you are guaranteed a fixed return as long as you hold the bond to maturity.

Income Funds

Designed for investors who are more interested in a regular income as opposed to capital gains, income funds are a type of mutual fund that include a wide variety of underlying investments ranging from conservative debt instruments to above-average risk ones. Generally speaking, some income funds may only invest in securities from established and creditworthy companies that make a consistent dividend or interest payments and as a result, they are considered conservative investments. However, other funds may focus on riskier investment aiming for higher yields.

What makes income funds an ideal source of passive income is the fact that they offer a steady cash flow, while they are still deemed less volatile than other types of funds such as growth funds. At the same time, they offer instant diversification. For instance, the Malta balanced income fund aims to maximise the total level of return for investors through investing in debt securities and money market instruments issued or guaranteed by the Government of Malta, as well as equities and corporate bonds issued and listed on the Malta Stock Exchange (MSE).

Passive income is paramount since it can simplify your life to a great extent down the line. And while it may call for some work at the outset, it does not require too much out-of-the-box thinking. Once the leg work is done, you can choose to do whatever it is that you desire, while you’ll be able to enjoy the satisfaction of knowing that you’re bringing in revenue no matter what.

Explore CC’s full range of investment options for the ideal passive income or visit one of our local branches for a FREE financial health check which includes a review of your current financial situation and a customised financial plan tailored to your needs.