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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 ceremony ), passive income is taxed by the IRS just in a slightly different manner. .
If youre familiar with the term 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 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 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 excellent way to construct long-term riches because 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 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 property. Investing in real estate comes with a high financial barrier to entry. If youre not quite there yet, consider a crowdfunded real estate 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 property resources.
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 produce selections it's all 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 that means lower transaction prices.
Become a silent partner. The sole responsibility of a silent partner is to provide a business with funds. Silent partners are rarely involved in an operational capacity, making it a great type of passive income.
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Start peer reviewed lending. Get matched up with a borrower online to begin peer-to-peer lendinga easy way to lend money to businesses and individuals. You can earn greater returns than similar this 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 provides a secure way to create a consistent income.
Grow a mobile app. If you have the programming skills and a one-of-a-kind idea, turn it into an app! The app marketplace is rife with opportunity for programs of all kinds.
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Start (or buy) a site. Having a little entrepreneurial spirit and a great deal of imagination, you can create a successful blogit just might take a little while. Prepare to work hard in the beginning, but through numerous revenue channels such as running ads, sponsorships, and affiliate marketing your work will more you can try these out than cover off. .
Affiliate marketing. There are numerous ways to use affiliate marketing in addition to having a blog. Although a large audience assists, even some regional businesses offer a word-of-mouth referral application for referring friends and family to their businesses.
License a business thought. If you have a fantastic 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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Purchase a vending machine business. Youve probably never thought twice about who owns all those vending machines, but the vending machine business can be a rewarding passive income source! Once you find the right place, hire someone to restock the machines to you and you've got your own business going. .