Modern Investment Options: What Works Best for Passive Income

Many people want to improve their financial situation but keep putting it off, waiting for “better times” or some magical amount of money to get started. However, the ideal time to start building wealth is now. In this article, I’ll look at how modern investment tools can help create alternative sources of income and help you choose the most suitable approach.

Passive income is often thought of as making money without doing anything: you invest once and then receive dividends for the rest of your life without any effort. In reality, things are a little different.

Passive income is a financial stream generated by assets in which you initially invest your time or money. Once established, the process requires minimal ongoing involvement and only occasional reviews of your strategy.

To understand what passive income really means, imagine having your own water supply system. Instead of carrying buckets of water every day — active work for a salary — you invest time and resources in building a water pipeline — investing. It requires resources at the beginning, but once the system is running, clean water flows by itself, and all you need to do is keep an eye on the taps.

Today, passive income in Ukraine can come from a range of sources, from traditional bank deposits and government bonds to property investments and buying a stake in a business. The key objective is to build an income stream that covers some or all of your regular monthly living expenses.

For many people, the word “investment” still conjures up images of complicated charts, shouting brokers and huge risks. But if we put those Hollywood stereotypes aside, what does investing actually mean in real life?

Simply put, investing means consciously choosing not to spend some of your money today in order to benefit from it in the future. It is a tool that turns savings into working capital.

Without investing, it is difficult to create a stable source of income. There are two key reasons for this:

1. Inflation. Even the world’s most stable currencies gradually lose value over time. You need effective financial instruments to preserve the value of your money or minimise the impact of inflation.
2. The power of compound interest. For investments where returns can be regularly reinvested — such as capitalising deposits, government bonds or accumulation funds — compound interest allows your capital to grow faster as your returns generate further returns.

By choosing long-term investments, you move from being simply a consumer to becoming an asset owner. Your money can start working for you regardless of whether you are currently working.

Once you understand the basics, the logical question is: where should you invest your money to achieve the right balance between security and returns? Today, there are several key options. Let’s take a closer look at each of them.

This is one of the simplest and lower-risk ways to preserve your money. Depending on market conditions and the term of the deposit, interest rates may partially or fully offset inflation.

Pros:

• high predictability;
• easy to open;
• government deposit guarantees.

Cons:

• moderate returns compared with some other investment instruments;
• with most fixed-term deposits, withdrawing your money early may result in losing some or all of the interest.

Government securities are considered one of the more reliable investment instruments available on the Ukrainian market. Essentially, you lend money to the government in exchange for a fixed return.

Pros:

• high level of reliability;
• investment income is not subject to personal income tax or military levy;
• they often offer competitive or higher returns compared with deposits.

Cons:

• some basic understanding of how the securities market or banking apps work may be required when making your first purchase.

A traditional way of investing capital. This can include buying residential property to rent out, investing in commercial premises or purchasing land.

Pros:

• a tangible asset;
• potential long-term capital appreciation;
• regular rental income.

Cons:

• high entry threshold, as significant capital is required;
• low liquidity — selling property quickly at market value is usually difficult.

Investing in securities of global companies or ready-made baskets of shares through ETF funds.

Pros:

• high potential investment returns;
• the ability to start with relatively small amounts;
• flexibility in choosing assets.

Cons:

• significant price volatility;
• you need to understand how international brokers work.

There are several main approaches: buying a stake in an operating business through a partnership, purchasing a franchise, or using crowdfunding/crowdlending to finance small and medium-sized businesses in exchange for interest.

Pros:

• high potential returns;
• the opportunity to acquire an established business model with existing processes or diversify your investments with relatively small amounts.

Cons:

• higher investment risks;
• thorough analysis of the company’s financial position is required before entering into a deal;
• access to crowdlending depends significantly on current regulations and the specific platform.

Investing in Ukraine today has its own specific characteristics. Despite the challenging external environment, the financial system offers several viable options for local investors.

In my view, hryvnia-denominated government bonds (OVDPs) remain one of the most accessible investment instruments on the domestic market. They offer competitive returns and can be purchased with just a few taps in a mobile banking app.

The agricultural land investment market is also developing. As this is still a relatively young market in Ukraine, it has significant growth potential. You can purchase agricultural land and receive rental income from agricultural producers while potentially benefiting from an increase in the land’s value over time.

One particularly challenging question is where to invest money during wartime. In these circumstances, protecting your capital from unexpected risks should take priority over chasing maximum returns.

I recommend following three basic safety principles:

• Diversify your risks. This is your main protection. Try to spread your money across several different asset classes — for example, government bonds, land and foreign securities — as well as different currencies. If one area temporarily declines, others can help balance your overall financial position.
• Prioritise liquidity. You should always have quick access to part of your money. Maintaining a reserve fund covering 3–6 months of living expenses in a highly liquid form — cash, current accounts or short-term deposits — is a basic foundation before considering any long-term investments.
• Keep your emotions under control. Panic is an investor’s biggest enemy. During periods of crisis and negative news, markets can fluctuate significantly. If you are investing in reliable assets, a temporary decline in their value should not force you to sell everything at a loss.

When developing a financial plan or taking your first steps into investing, remember: investing for beginners should start not with choosing a specific asset, but with analysing your own financial behaviour.

Here is a step-by-step checklist to help you make your first confident moves:

1. Improve your financial literacy. Read basic books on financial literacy or explore educational materials from the National Bank of Ukraine. This will help you understand how interest, taxes and market cycles work.
2. Start tracking your budget. It is difficult to invest if your account balance reaches zero at the end of every month. Identify non-essential expenses and start regularly setting aside part of your income.
3. Define your goals and timeframes. Whether you need the money in a year for a major purchase or are building wealth for several decades will directly influence which investment instruments are appropriate.
4. Avoid “get-rich-quick” schemes. If someone promises guaranteed high returns with no risk in a “super project”, that is a reason to stop and think. Real investment risks are always linked to potential returns.

Let’s look objectively at where to invest your money so that the decision matches your goals. The main question — where to invest for passive income — has no universal answer. Everything depends on what matters more to you: stability or potentially higher returns.

For comparison, here is a table.

If your goal is maximum predictability and a regular fixed return, deposits and government bonds can form the foundation of your portfolio. If you want to build significant wealth over the long term and are comfortable with market fluctuations, the stock market, property or business investments may be more suitable.

Remember that a well-balanced investment portfolio combines several instruments in different proportions. There is no universal financial strategy. When deciding where to invest your money to generate returns, don’t try to predict the future or chase the latest trends. Instead, focus on building a diversified portfolio. Let more predictable instruments — government bonds and deposits with reliable banks — form the foundation. Then, as you gain experience and have additional capital available, you can gradually add other assets such as property, land or business interests.