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Weve already covered the fundamentals, but lets break it down even farther. 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 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 just about any area of your life includingand especiallyyour finances. In addition to retirement becoming an ever-elusive goal, 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 with a robo-advisor. An option that needs 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 intentions.
Invest in dividend paying stocks. Dividend-paying stocks are a great way to construct long-term riches since you get paid a portion of the companys earnings just for owning the stockexchange.
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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 website.
Participate in crowdfunded real estate. Investing in real estate comes with a large financial barrier to entry. If youre not there yet, consider a crowdfunded property venture that allows you to invest in a small percentage of real estate.
Invest in a Real Estate Investment Trust (REIT). REITs are companies which manage income-producing properties in a variety of sectors. They trade on major stock exchanges so anyone can invest in a portfolio of property assets.
Buy royalties. Music royalties come from a percentage of the money earned from the sale or use of a song. Even if youre not a musician , music royalties are often up for auction and will send a monthly check your own 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's all up to an asset management company. This type of investment is a fantastic option since its relatively hands-off and has a low turnover that means lower 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 capacity, making it a fantastic type of passive income.
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Start peer-to-peer lending. Get matched up with a borrower online to start peer-to-peer lendinga simple approach check that to lend money to businesses and individuals. You can earn higher 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 distinctive type of account provides a safe method to create a consistent income.
Grow a mobile program. In case you have the programming skills and a one-of-a-kind idea, turn it into an app! The app market is rife with opportunity for apps of all kinds.
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Start (or buy) a blog. With a little entrepreneurial spirit and a lot of imagination, you can create a prosperous blogit just might take a little while. Prepare yourself to work hard in the beginning, but through numerous revenue channels such as running ads, sponsorships, and affiliate marketing your work will more than pay off. .
Affiliate marketing. There are numerous methods to use affiliate marketing in addition to having a site. Although a large audience helps, even some regional businesses offer a word-of-mouth referral application for referring friends and family to their businesses.
License a business idea. In case you have a great idea for a business or product, but dont have enough 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 of those vending machines, but the vending machine business can be a lucrative passive income source! Once you find the appropriate place, hire someone to restock the machines for you and you've got your own business going. .