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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. Just like active income (money earned from performing a service), passive income is taxed by the IRS just in a slightly different way. .
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 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 do activities you do.
Invest with a robo-advisor. An option which requires little to no effort, a robo-advisor is an electronic platform that provides algorithm-driven financial planning services by collecting information about clients financial situation and intentions.
Invest in dividend paying stocks. Dividend-paying stocks are a great way to construct long-term riches because you get paid a portion of the companys earnings simply for owning the stock.
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Purchase a rental house. Have some space youre not using Rent it out to some long-term tenant or capitalize on the growing demand for short-term lodging by listing it on an accomodation-sharing site.
Participate in crowdfunded real estate. Investing in real estate has a large financial barrier to entry. If youre not quite there yet, consider a crowdfunded property 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 assets.
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 produce selections it is up to an asset management company. This type of investment is a fantastic option because its relatively hands-off and has a low turnover that means lower transaction costs.
Become a silent partner. The sole responsibility of a silent partner is to offer a business with funds. Silent partners are rarely involved in an operational capability, making it a fantastic 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 method to make a consistent income.
Grow a mobile program. If you have the programming skills and a one-of-a-kind thought, turn it into an app! The app market is rife with opportunity for programs of all kinds.
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Start (or buy) a blog. Having Discover More a little entrepreneurial spirit and a great deal of creativity, you can create a prosperous blogit just might take a little while. Prepare to work hard in the beginning, but via multiple revenue streams like running advertisements, sponsorships, and affiliate marketing your work will more than pay off. .
Affiliate marketing. There are several methods to use affiliate marketing in addition to having a blog. Even though a massive audience helps, even some local businesses provide a word-of-mouth referral program for referring friends and family to their businesses.
License a business thought. In case you have a great idea for a business or product, but dont have enough time to start it yourself, then consider licensing that idea. Interested companies are willing to pay royalties in exchange for the right to use your idea.
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Purchase a vending machine business. Youve probably never thought twice about who owns all those vending machines, but the vending machine business can be a lucrative passive income source! Once you find the right spot, hire someone to restock the machines to you and you've got your own business going. .