How to Invest $200K for Passive Income

Building passive income streams is an effective, low-effort strategy for growing wealth. There are numerous ways to generate passive income, so if you’re exploring how to invest $200,000 to generate monthly income then understanding your options is key. A financial advisor can give you guidance and help you create a comprehensive plan to establish multiple income streams.

What Is Passive Income?

Passive income refers to earnings generated from activities other than traditional employment or self-employment. In simpler terms, it’s money you earn with minimal effort, time or labor.

Establishing one or more reliable sources of passive income can significantly support your financial goals. For example, if you don’t rely on passive income for daily expenses, you might use it to contribute to a tax-advantaged retirement account or accelerate debt repayment.

The most effective forms of passive income require little to no ongoing involvement. They not only help you generate extra money, but also save you time, as they typically don’t demand significant effort to maintain.

How Much Monthly Income Can $200K Generate?

Before choosing an investment, it helps to estimate how much monthly income $200,000 could realistically produce. The amount depends on the type of investment, its expected return, and how income is distributed—monthly, quarterly, or annually. For example, conservative investments like fixed-income securities may generate a few hundred dollars per month, while higher-risk options like real estate or dividend stocks could provide more, but with greater variability.

If you’re aiming for consistent monthly income, you might target an average annual yield of 4% to 6%. That would generate roughly $667 to $1,000 per month. More aggressive strategies aiming for 8% to 10% returns could push that monthly figure closer to $1,300 to $1,600, though those outcomes are less predictable and may involve more volatility or liquidity constraints.

Calculating your expected monthly income from different investment types can help clarify which combination of investment strategies best meets your financial goals. Pairing lower-risk, steady-income sources with a few higher-yield opportunities may help balance reliability with growth.

How to Invest $200K for Monthly Income

A woman looking at her investments to see how much monthly income she will make.

Investing is one of the best ways to create passive income since you can effectively put your money to work for you. The more you have to invest, the more passive income you might be able to generate. If you have at least $200,000 to invest for monthly income, here are some of the smartest ways to do it.

1. Dividend stocks

Dividend stocks pay out a portion of profits to their shareholders. Depending on how the stock pays out its dividends, you might be able to receive them as income or reinvest them in additional shares through a dividend reinvestment plan (DRIP).

Investing in dividend stocks could be a good long-term play if you’re a buy-and-hold investor. If you’re looking for the best dividend stocks, you might consider the dividend aristocrats. These are stocks that have consistently increased their dividend payout over a period of 25 consecutive years or longer.

2. Index Funds

Index funds are mutual funds that attempt to mimic the performance of an underlying stock market index. For instance, you might invest in an index fund that uses the S&P 500 as its benchmark.

Investing in index funds can help you create a steady stream of dividend income, while also enjoying some long-term capital appreciation. Cost is another advantage of index funds, as they tend to carry lower expense ratios than other mutual funds.

3. Rental Properties

Owning a rental property could be one of the most profitable ideas for how to invest $200,000 for monthly income over the long term. You could invest your $200,000 towards the purchase of a rental property, then collect rental income for as long as you hold it.

Rental properties can be a great way to hedge against inflation since housing prices tend to rise in tandem with increases in other consumer prices. There is some risk, however, as you’ll need to be able to keep the property occupied in order to create passive rental income each month.

4. Real Estate Investment Trusts (REITs)

Don’t want to own a rental property outright? You could still earn passive income from real estate with a real estate investment trust. REITs are legal entities that own investment properties and pay dividends to their investors. You get all of the benefits of owning property without having to purchase or maintain it yourself. REITs can offer exposure to a variety of property types, including office space, retail space, warehouses or multifamily housing.

5. Real Estate Crowdfunding

Real estate crowdfunding platforms offer another avenue for property investments, without requiring any direct ownership. When you invest through a crowdfunding platform, you pool your money alongside other investors to own one or more properties.

During the investment term, the crowdfunding platform can pay dividends back to you monthly, quarterly or annually. Once the investment holding period ends, you can get your initial investment back. A typical holding period can last anywhere from five to 10 years, while the minimum investment can be as low as $500, depending on which platform you’re using.

6. Fixed-Income Securities

Fixed-income securities can pay out interest or dividends to you on a monthly basis, often with minimal risk. Examples of fixed-income securities can include bonds, money market funds and brokered certificates of deposit (CDs) that earn a fixed interest rate.

In terms of risk, fixed-income securities are usually considered to be a safer bet than stocks. However, the returns may be lower so that’s important to consider, depending on your personal risk tolerance and goals.

7. Peer-to-Peer Lending

Peer-to-peer (P2P) lending platforms connect investors with borrowers who need funding and don’t want to (or can’t) get traditional financing. Similar to real estate crowdfunding, you’re pooling your money with other investors to fund loans. You then make money on your investment by collecting interest from the borrower.

Investing $200,000 in peer-to-peer loans could generate a sizable return if you’re earning solid rates but it can be risky. The lower a borrower’s credit grade, the greater the risk that they may default on their loan obligation.

8. Art and Fine Wine Investments

If you’re seeking some alternative investment options, you might consider holding fine art or fine wines in your portfolio. You don’t need to drop your entire $200,000 investment in a single painting or bottle of Merlot either, as there are online investment platforms that allow you to invest fractionally.

For example, you might be able to own a piece of famous artwork by purchasing shares in it alongside other investors. Or you could invest in wine and spirit securities without having to take possession of any physical bottles. These types of investments can add diversity to a portfolio while also creating monthly income.

9. Annuities

An annuity is a type of insurance contract in which you pay a premium to the annuity company, in exchange for receiving monthly payments beginning at a later date. Paying $200,000 for an annuity could make sense if you’re hoping to create a supplemental stream of income for retirement.

For example, you might buy a deferred annuity at age 55 with the intention of starting payments at age 62. Annuities do have some risks and some of them can be expensive when you consider the various fees you’ll pay. However, you could create a reliable, guaranteed income for retirement using annuities.

Bottom Line

A woman looking at investment choices to see what income investments look best.

There’s no single best route for how to invest $200,000 for monthly income, as there are so many ways to do it. Considering your goals can give you a starting point for deciding which options might be right for you. It’s also important to keep your overall asset allocation in mind, as concentrating too much of your portfolio in any one area could increase your risk exposure.

Investing Tips

Talking to a financial advisor could make it easier to decide how to invest $200,000 for monthly income, both for the short- and long-term. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
High-yield savings accounts and money market accounts are another option for generating passive income through interest earnings. Depositing money into a savings account or money market account can be a safer option than investing it in the market, though you likely won’t get the same level of returns. Comparing the best savings accounts at online banks can give you an idea of how much interest you might be able to earn.