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Weve already covered the fundamentals, 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 ways to earn a passive income: investing money, investing time, renting things out, and getting paid to do activities you do.
Invest using a robo-advisor. An option that requires little to no effort, a robo-advisor is an electronic 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 because you get paid a portion of the companys earnings just for owning the stock.
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Buy 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 property. Investing in real estate comes with a large financial barrier to entry. If youre not 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 which manage income-producing properties in many different 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 other 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 produce selections it's all up to an asset management company. This type of investment is a fantastic option since its comparatively hands-off and has a very low turnover that means lower transaction prices.
Become a silent partner. The sole responsibility of a silent partner is to provide a business with capital. 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 easy approach 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 special type of account provides a safe way to make a consistent income.
Grow a mobile program. If you have the programming skills and a one-of-a-kind idea, turn it into an app! The program market is rife with opportunity for apps of all kinds.
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Start (or purchase ) a blog. With a small entrepreneurial spirit and a lot of creativity, you can produce their website a prosperous blogit just might take a little while. Prepare to work hard in the beginning, but through numerous revenue channels such as running advertisements, sponsorships, and affiliate marketing your job will more than pay off. .
Affiliate marketing. There are several ways to use affiliate marketing in addition to having a site. Even though a massive audience assists, even some regional businesses provide a word-of-mouth referral program for referring friends and family to their businesses.
License a business idea. In case you've got a fantastic idea for a business or product, but dont have time to start it yourself, consider licensing which thought. 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 of those vending machines, but the vending machine business can be a lucrative passive income source! Once you find the appropriate spot, employ someone to restock the machines to you and you've got your own business going. .