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Weve already covered the basics, but lets break it down even further. In a technical sense, passive income is money earned from an enterprise in which a person is not actively involved in. The same as active income (money earned from performing a service), passive income is taxed by the IRS just in a slightly different manner. .
If youre familiar with the phrase dont put all your eggs in one basket, then you know that it applies to virtually any area of your life includingand especiallyyour finances. In addition to retirement becoming an ever-elusive target, no one has guaranteed job security so by diversifying your income you can feel much more secure about saving for your future.
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There are four main strategies to earn a passive income: investing money, investing time, renting things out, and getting paid to perform activities you already do.
Invest using a robo-advisor. An option that requires little to no effort, a robo-advisor is a digital platform that offers algorithm-driven financial planning services by collecting information about clients financial situation and goals.
Invest in dividend paying stocks. Dividend-paying stocks are a great way to build long-term riches since you get paid a portion of the companys earnings simply for owning the stockexchange.
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Buy a rental property. Have some space youre not using Rent it out to a long-term tenant or capitalize on the growing demand for short term lodging by listing it on an accomodation-sharing site.
Participate in crowdfunded property. Investing in real estate has a large financial barrier to entry. If youre not quite there yet, consider a crowdfunded real estate venture which allows you to invest in a small percentage of real estate.
Invest in a Real Estate Investment Trust (REIT). REITs are companies that manage income-producing properties in a variety of sectors. They trade on major stock exchanges so anyone can invest in a portfolio of real estate resources.
Buy royalties. Music royalties include a percentage of the money earned from the sale or use of a song. Even if youre not a musician yourself, music royalties are often up for auction and will send a monthly check your way.
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Invest in index funds. Index funds are similar to mutual funds, but instead of having a portfolio manager make selections it is up to an asset management company. This type of investment is a fantastic option because its comparatively hands-off and includes a very low turnover which means lower more transaction prices.
Become a silent partner. The sole responsibility of a silent partner is to provide a business with funds. Silent partners are rarely involved in an operational capability, making it a great form of passive income.
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Start peer-to-peer lending. Get matched up with a borrower online to begin peer-to-peer lendinga simple way to lend money to businesses and individuals. You can earn greater returns than comparable transactions through traditional financial institutions.
Open a high-yield savings account. If youre already putting money into a savings account on a consistent basis, consider opening a high-yield savings account. This special kind of account provides a safe way to create a consistent income.
Develop a mobile app. In case you have the programming skills and a one-of-a-kind idea, turn it into an program! The anchor program market is rife with opportunity for programs of all kinds.
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Start (or buy) a blog. With a small entrepreneurial spirit and a lot of imagination, you can produce a prosperous blogit just might take a little while. Prepare yourself to work hard in the beginning, but through multiple revenue channels such as running ads, sponsorships, and affiliate marketing your work will more than cover off. .
Affiliate marketing. There are numerous methods to utilize affiliate marketing in addition to having a blog. Although a massive audience assists, even some regional businesses offer a word-of-mouth referral program for referring friends and relatives for their businesses.
License a business thought. In case you have a great idea for a business or product, but dont have time to start it yourself, then consider licensing which thought. Interested companies are willing to pay royalties in exchange for the right to use your idea.
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Buy a vending machine business. Youve probably never thought twice about who actually owns all those vending machines, but the vending machine business can be a lucrative passive income source! Once you find the right place, hire someone to restock the machines to you and you've got your own business going. .