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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, 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 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 do.
Invest using a robo-advisor. An option which needs 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 goals.
Invest in dividend paying stocks. Dividend-paying stocks are a excellent way to build long-term wealth because you get paid a portion of the companys earnings simply for owning the stock.
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Purchase a rental property. 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 property. Investing in real estate comes with a high financial barrier to entry. If youre not quite there yet, consider a crowdfunded property venture which enables you to invest in a small percentage of property.
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 , 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 great option since its relatively hands-off and has a low turnover which means lower transaction prices.
Become a silent partner. The sole responsibility of a silent partner is to offer a business with funds. Silent partners are seldom involved in an operational capability, making it a great form of passive income.
Invest in cryptocurrencies. Cryptocurrencies are buzzing with opportunity at the moment, and it's possible to earn a passive income by simply holding certain cryptocurrencies.
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Start peer-to-peer lending. Get matched up with a borrower online to start peer-to-peer lendinga simple way 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 offers a safe way to make a consistent income.
Develop a mobile app. If 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. Having a small entrepreneurial spirit and a lot of creativity, you can produce a prosperous blogit just might take a little while. Prepare to work hard in the beginning, but via numerous revenue streams like running advertisements, sponsorships, and affiliate marketing your job will more than pay off. .
Affiliate marketing. There are numerous ways to use affiliate marketing in addition to having a site. Although a massive audience helps, even some regional businesses offer a word-of-mouth referral program for referring friends and relatives for their businesses.
License a business idea. If you have a great idea for a business or product, but dont her explanation have enough 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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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 rewarding passive income source! Once you find the appropriate spot, hire someone to restock the machines to you and you've got your own business going. .