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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 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, 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 needs little to no effort, a robo-advisor is an electronic 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 build long-term riches since you get paid a portion of the companys earnings just for owning the stock.
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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 property. Investing in real estate has a large financial barrier to entry. If youre not quite there yet, consider a crowdfunded real estate venture that enables 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 property 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 , 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's all up to an asset management company. This sort of investment is a great option because its relatively hands-off and includes a low turnover that means lower transaction costs.
Become a silent partner. The sole responsibility of a silent partner is to provide a business with capital. Silent partners are seldom 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 easy way to lend money to businesses and individuals. You can earn greater returns visit this site 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 special kind 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 thought, turn it into an app! The app market is straight from the source rife with opportunity for programs of all kinds.
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Start (or buy) a blog. Having a small entrepreneurial spirit and a great deal of imagination, 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 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 local businesses offer a word-of-mouth referral application for referring friends and relatives for their businesses.
License a business thought. If you've got a great idea for a business or product, check here but dont have enough time to start it yourself, then consider licensing that 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 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. .