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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 passive income (money earned from performing a ceremony ), passive income is taxed by the IRS 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 target, 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 do activities you already do.
Invest with 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 goals.
Invest in dividend paying stocks. Dividend-paying stocks are a great way to construct long-term wealth because you get paid a portion of the companys earnings simply for owning the stockexchange.
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Buy a rental house. Have some distance youre not using Rent it out to a 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 large financial barrier to entry. If youre not there yet, consider a crowdfunded property 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 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 come from 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 and will his response 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 because its comparatively hands-off and has a very low turnover which means lower transaction costs.
Become a silent partner. The sole responsibility of a silent partner is to offer a business with capital. Silent partners are seldom involved in an operational capacity, 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 start peer-to-peer lendinga simple 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 offers a secure method to make a consistent income.
Develop a mobile app. If you've got the programming skills and a one-of-a-kind thought, turn it into an program! The app marketplace is rife with opportunity for advice apps of all kinds.
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Start (or buy) a blog. With 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 through numerous revenue channels such as running advertisements, sponsorships, and affiliate marketing your work will more than pay off. .
Affiliate marketing. There are several methods to utilize affiliate marketing in addition to having a blog. Although a large audience helps, even some local businesses provide a word-of-mouth referral program for referring friends and family to their businesses.
License a business idea. If you've got a great idea for a business or product, but dont have time to start it yourself, then 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 i thought about this owns all those vending machines, but the vending machine business can be a rewarding passive income source! Once you find the right spot, hire someone to restock the machines for you and you've got your own business going. .