Passive Investor vs Active Investor
None of these methods are easy. In fact any business or money making idea is not easy; they take hard work, dedication and commitment. They’re not get rich quick schemes. Everything good or worth doing takes time. Time and compounding are the friend of any investor.
What is Passive Income?
Passive income is about making your money work for of you. But sadly not without you.
The word passive income is really a misnomer, as not any single income strategy can truly be called passive.
Every form of income requires some kind work. There may be some work required at the beginning to set up the income stream, and maybe ongoing monitoring or maintenance is required while you hold an investment. Everything requires at least some work.
Rules of Passive Investing
- No investment is truly passive. Some kind of work will always be required. Nothing works by itself.
- Every investment must pay you to own it. That is, to give you an income. It must pay you a return on your investment. Otherwise it’s not and investment but merely a speculation.
- Trading is neither Active or Passive Investing. It’s a full time job.
- Start small, accumulate slowly, and let compounding do the rest.
Popular Forms Of Passive Income
- Cash in the bank
– interest is a form of income that is relatively passive, however (1-2%) is not the best return.
- Money Market fund
– returns here might be higher than cash in an ADI, but the risks are higher for still not a great return.
- Corporate and Government Bonds
– returns here might be higher than cash in an ADI, but the higher the return offered the higher is the risk.
- Listed Shares
– a dividend is a form of income that comes from a return from stocks (ownership of shares) in a publicly traded company. The amount paid per share is distributed to all owners of the stock.
Popular Forms Of Active Investment Income
- Direct Private Business
– Income in the form of returns from an investment in a private business.
- Actively Trading Shares
– Income in the form of returns from directly trading shares and other financial assets on a regular basis.
- Rental Properties
– Income in the form of rental return from the ownership rights to a property.