A financial product is the type of an asset in which we put money hoping that the invested amount will grow onto a bigger amount at the end of a particular period. The value of the investment can grow by way of appreciation in value i.e. stocks or through regular interest payments i.e. certificate of deposits or CD’s.
“Someone is sitting in the shade today because someone planted a tree long time ago” – Warren Buffet
Certificate of Deposits (CDs) are most common form of financial investment instruments. We all have a savings bank account and you earn a small amount of interest on the amount of money that is lying idle in your account. The bank pays you fees or interest for keeping your money in their bank. When you make the deposit for a longer term the fees or the interest paid by the bank is higher. This is by far the safest form of investment and therefore the returns are also on the lower side. This option is best for the risk averse investors or retired people who are looking for a risk free passive income from their deposits.
Stocks and mutual funds is the next big category of financial product where loads of money is made and lost every day by investors. You can generate passive income from stocks that produce dividend income. The key here is to invest in stocks of such companies that have a reliable history of declaring regular dividends. This way you do not have to worry whether the price of the stock is going up or down. The appreciation in the stock price is the icing on the cake and dividend become your regular passive income.
Gold and other such metals like silver etc. also come under financial products category even though people do own physical gold also in form of jewellery and ornaments. One can invest in gold through gold funds without physical ownership. As the price of metal goes up and down as per market conditions one stands to gain through long term price appreciation without putting in much effort.
These are just a few most popular options that have been discussed above. However the financial products market is flooded with options of various instruments that can be evaluated and used for generating passive income.