With the best returns on Cash ISAs currently standing at around 1.5%, many people are in danger of seeing their spending power decline gradually over the long run.
Furthermore, with interest rate rises expected to be relatively slow over the next few years, this situation may persist for some time.
Therefore, now could be a good time to consider other options when it comes to generating a passive income. Fortunately, there is a significant amount of choice available to investors who are looking to beat inflation and obtain a growing passive income over the long run.
Income funds
There are a variety of income-focused funds which could provide a significantly higher passive income than that offered by a Cash ISA. Of course, there are usually fees charged by income funds in order to pay for the cost of researching stocks, as well as other expenses. However, some fund managers could be well worth the fees they charge, with them having successful track records of generating not just a high income return, but also capital growth.
Income funds may be especially useful for investors who wish to gain exposure to a wide range of companies in geographies that they do not usually focus on. For example, a UK-based investor may wish to buy a fund that contains US-listed companies, as well as stocks listed elsewhere, that they would not normally hold within their own portfolio. As such, income funds can provide greater diversity for investors, as well as inflation-beating income returns.
REITs
While being a landlord may be less appealing than it has been in the past as a result of tax and regulatory changes, the property industry continues to offer investing appeal. One means of gaining access to it is through real estate investment trusts (REITs). They provide an investor with exposure to a wide range of properties, with different REITs focusing on a variety of areas such as retail, leisure and offices.
At the present time, a number of REITs listed on the FTSE 100 and FTSE 250 appear to offer wide margins of safety. They trade below net asset value in many cases, which suggests that they are undervalued.
FTSE 100 dividend stocks
Of course, an obvious place to invest in order to obtain an inflation-beating income is the FTSE 100. The index currently has a yield of over 4%, while it is possible to buy stocks with much higher income returns than the wider index.
With the long-term prospects for the world economy being positive, and the FTSE 100 having a track record of growth, the index could offer high total returns that rise at a fast pace over the long run. Since dealing costs have fallen in recent years, it is easier than ever to build a diverse portfolio of shares in order to improve your risk/reward ratio and generate a robust passive income for the long term.
