Ranjan is a market research professional and he works as an independent researcher for many clients from the US and Europe.
Having a source of income that will require less effort and more returns is a desire among many. Yet, with the current rate of unemployment and massive global economic recession, it may seem impossible to work less and earn more. Having a passive source of income may seem to be the only option to generate more financial resources with less effort.
What is Passive Income?
Passive income includes earnings that do not involve active participation. It includes incomes from high yield savings accounts, market funds, property rental, or enterprise, etc. The common agreement with regards to passive income is the fact that it is a desired source of revenue. Its also proven to be a fast track to true financial freedom. However, varying concerns enshrines what qualifies as a passive income. All passive incomes involve initial input. However, aside from the initial labor and resource inputted at set-up; the cash generation continues independently of subsequent active participation.
Five Passive Income Streams you should know
Passive income streams could be either property income, commissions, royalties, interest, or an inheritance. While none of these sources is superior; they allow us to attain different strokes for different folks. However, all the options may not be suitable or available to everyone. Factors influencing which investment type to deploy depends on the investors’ risk-reward limits, capital available for an initial investment, and availability of startup skills among others. The list of common sources of passive income, but not limited to this, you should know includes the following:
- Property Income: This includes earning from rentals of properties such as housing, land, halls, facilities, and machinery.
- Commissions: This includes returns from all forms of direct sell earnings that come from the activities of network members. Affiliate marketing covers a wide range of areas including material and none material goods and services.
- Royalties: This is earnings from original contents developed either alone or in partnership and put together in any form for public consumption at a return. The most common forms are e-books, YouTube, and blog content.
- Interest: This is earning from high return savings, peer cash services, or any other financial services that offer returns or interest on capital.
- Inheritance: Wealth transferred as a form of inheritance, entitlements, or allowances from family-owned assets.
How to Identify the Right Passive Income Streams?
Many people desire to have their money work for them while they put more energy into other ventures that can either generate more money or satisfy their other needs. In other for your money to generate returns for you, you have to understand the right investments to do and identify investment opportunities to steer clear of. Unfortunately, the multiple types and forms of investment available make it almost impossible to provide a comprehensive list of how to identify the right investment. An exclusion list is thus a quick and better guide for you.
A word of caution on the onset is the need to acknowledge that no form of investment planned towards passive earning is without risk. Hence, any form of investment that promises no risk whatsoever to your investment should not be considered.
Secondly, setting up a truly sustainable passive income stream takes intense initial resources. This might be in the form of time, money, or professional expertise and skill. You must be prepared and able to make the initial resource investment. While it is tempting to yield opportunities that seem to require less initial input or easy opportunities; these opportunities are mostly fraudulent or non-sustainable
Also, it might be appealing to embrace an opportunity as a passive income source because it seems easy and requires effort. No matter how little this might be, choose opportunities that are within your sphere of strength and will not require learning overly technical skills to initiate. Failure to embrace opportunities by effectively analyzing and being sure you can effectively execute the take-off or manage the demands of the opportunity can lead to partial/total loss on investment soon.
Furthermore, timing when investing is a very delicate matter. Before any investment is made, it is important to monitor the investment or stock market. A news headline may suggest that stocks in a country or company might be favorable or unfavorable tomorrow and thus, influence the final decision that needs to be made before any money or effort is invested.
Make no mistake, you are going to have to dedicate a significant amount of time – and probably invest some money too especially If you want to get your passive income streams up and flowing. All passive income seems to be very active at the beginning, However, after a while, the source of the income will naturally experience a market shake. Recognizing and accepting the trends which lead to market shakes can make an investor know when to withdraw or invest more. The maturation time and yield of an opportunity should also be considered. Every investor needs to bear in mind that alternative income streams do not grow overnight. Like any issue of value, it takes time to mature. Be sure the length of time from investment to initial yield is okay for you.
And lastly, returns vary for various individuals even within the same investment type. You must ensure that the returns on any investment are congruent with your expected earnings; especially if they considered a potential alternative to your current job. Thus, the number of returns you desire should be properly considered in light of the opportunity to be properly guided. This is necessary especially when decisions around trading risky on waters for massive returns; or safety in exchange for little returns on investment.
In conclusion, if you want to have a stable passive income flow, you will have to understand the concept of passive income, when to invest and how to invest. Although there is no perfect time to invest, an investor should be able to accept the risk and be ready to work towards reducing the risk in other to increase their level of income.
This content is accurate and true to the best of the author’s knowledge and is not meant to substitute for formal and individualized advice from a qualified professional.