ChatGPT Told Me the Best Way To Turn $5K Into Passive Income — Here’s the Plan
Financial security is the watchword these days. But how to obtain it?
A lot of financial gurus on social media will tell you that the best path to financial security is passive income. But what exactly does that mean? And how to you get there? And don't you need a lot of money to start with?
It turns out that there are lots of ways to get there and you can start small. ChatGPT told me the best way to turn $5,000 into passive income. Here's the plan.
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What Is Passive Income?
Simply put, passive income is money that makes more money, without you having to do anything. So, it's not money you earn from work, but from investing. Sometimes you have to do some work in the beginning, but eventually your passive income should be on autopilot, earning money for you while you work at your day job, relax or even sleep.
ChatGPT presents several possible ways to turn $5,000 into passive income. It cautions that there is no magic way to earn passive income, but the best way for you depends on your risk tolerance and time horizon and on how passive you want your passive income to be.
Dividend ETFs for Maximum Passivity and Low Stress
ChatGPT recommends investing in diversified mutual funds that pay regular dividends, citing Vanguard Total Stock Market Index Fund ETF (VTI), Schwab U.S. Dividend Equity ETF (SCHD) and Vanguard S&P 500 ETF (VOO) as examples.
ChatGPT estimates that the dividends paid by these kinds of funds average about 2%-4% per year, so a $5,000 investment will provide $100-$200 per year in income. The LLM said this is the 'boring but smart baseline option.'
High-Interest Savings for Better Returns
The interest rate on a high-yield savings account or money market can be 4%-5% "in good environments," according to ChatGPT. This option is said to be "passive-ish" as rates can fluctuate and you need to keep an eye on your account if rates drop. The option will provide about $200 — $250 in passive income per year, with no risk to your principal.
Peer-To-Peer Lending for Income With Some Risk
Peer-to-peer lending or income platforms consist of you lending your money out to other people and collecting interest. This can provide income of about 6%-10% or $300-$500 on a $5,000 investment. Chat GPT cautions that this option is "less passive than advertised" and "needs diversification to work well."
Asset-Building for Real (Though Not Instant) Passivity
ChatGPT recommends using your $5,000 to build an online asset, like a website with ads, a digital template or guide or an automated online store. Then, make it passive so that income is generated without you having to do anything else. This is a good idea for "people willing to trade time now for passive income later," according to ChatGPT. The range of income can vary widely, from $0 to $500 or more per month.
What Not To Do With $5,000
ChatGPT identifies several passive income schemes it recommends avoiding if you have $5,000 to invest. These include:
"Guaranteed" high-yield schemes
Day trading or meme stocks
Random crypto punts hoping for passive income
Courses promising easy automation
The bottom line? ChatGPT recommends a hybrid approach, specifically, putting some of your money into safe but boring investments and using some the build or buy an asset that can scale.
Keep in mind that ChatGPT draws information from online sources and doesn't have any insight into your specific situation. You should verify its claims independently before making any decisions.
Editor’s note: While AI tools can assist in categorizing expenses and setting savings targets, they cannot replace the expertise and guidance of financial advisors.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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