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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. Just like passive 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 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 ways 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 attempt, a robo-advisor is a digital platform that provides algorithm-driven financial planning services by collecting information about clients financial situation and goals.
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 simply for owning the stock.
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Buy a rental house. Have some distance 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 has a high 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 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 is up to an asset management company. This sort of investment is a great option since its comparatively hands-off and has a low turnover that means lower transaction prices.
Become a silent partner. The sole responsibility of a from this source silent partner is to provide a business with capital. Silent partners are rarely involved in an operational capability, making it a great form 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 to lend money to businesses and individuals. You can earn higher returns than similar 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 kind of account offers a safe way to make a consistent income.
Grow a mobile app. In case you have the programming skills and a one-of-a-kind thought, turn it into an program! The app 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 great deal of imagination, you can create a successful blogit just might take a little while. Prepare yourself to work hard in the beginning, but via multiple revenue channels such as running ads, sponsorships, and affiliate marketing your job 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 application for referring friends and family to their businesses.
License a business thought. In case you've got a great idea for a business or product, but dont have time to start it yourself, consider licensing that idea. 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 owns all of those vending machines, but the vending machine business can be a rewarding passive income source! Once you find the appropriate place, hire someone to restock the machines to you and you've got your own business going. .