Passive Investing 101: Understanding the Advantages of Passive Investments
Passive income such as real estate investment is one of the key factors that an individual can gain wealth. Passive investment is an investing strategy which aims to maximize returns on the long run, through keeping the amount of selling and buying to a minimum level. The main concept of passive investment is avoiding fees and drag on the performance that can potentially occur in frequent trading. Passive investment is not a source of immediate or fast wealth build-up, rather it takes a slow process but steady wealth over time. Passive investment is also referred to as buy-and-hold strategy, wherein it involves the process of buying a security with the intention of owning it for a specific number of years. Passive investment investors are not after the profit gained through short-term price fluctuations, also known as “time the market”, but rather the positive returns gained in a given enough time.
What are the strategies in passive investing? The different types of passive income are real estate or rental income, interest income, royalty income, dividend income, membership fees, advertising income, affiliate income, business income, pension income and donation income. You can enjoy your holiday vacation locally or abroad and still earn without too much effort, through real estate investments, because these can be leased such as building and office spaces. The younger you invest on real estate income, the sooner and the longer you will taste the sweet of this kind of passive income. Rental income can also be obtained through movable properties like vehicles and equipment.
For interest income, you have to work harder and frugal to have enough money in order to gain a considerable high interest such as your investments in bank deposits and lending to your debtors. Royalty income can be earned through royalty fees by publishing a book, writing a song or being a great singer, from licenses for using software, your photos for being a professional photographer and trademark for franchising. Dividend income is a passive income earned through stocks or shares of a corporation, and it involves a higher risk though. In dividend income, an investor must be guided by the right knowledge, skills and attitude to the proper discipline about investing in stocks and other securities. Membership revenues can be earned through golf club, fitness gym, and membership websites that contain useful and unique contents where users or members pay a regular membership fee to be able to access those contents. The contents of your website can be in a form of software, applications, podcast, videos, articles and scripts. Advertising and affiliate sources of passive income can be earned by generating blogs and websites through direct advertising, third-party advertising and affiliate marketing.