Passive income: 5 ways to live on investments

In this article, we will present you 5 effective ways to generate passive income, by using your capital, your skills, your time.
how to generate passive income

In this article, we will present you 5 effective ways to generate passive income, by using your capital, your skills, your time.

However, before starting, it is important to understand that living on an income is not an easy or quick goal to achieve. Money doesn’t grow on trees, and those who sell you quick and easy profit in 99% of cases want to scam you.

Before continuing towards the 5 ways to make a living from investments, let’s clarify some concepts. We define the incomes you will read about in this article as passive, since they do not constantly require your presence. However, some of them will require you to review and reorganize from time to time. Or as in the case of ETFs you will have to rebalance the portfolio so that it is optimized and produces at its best.

What is a passive income

A passive income is a recurring cash flow that lands in our pockets. For work that has been done one or more times, but is currently no longer being done. There are, in fact, different types of passive income. What they all have in common is the ability to generate money even while we sleep. But how can we

There are actually many options available for creating passive income, including financial investments, real estate, auto businesses, and online businesses.

To live on an income it is necessary that passive income exceeds expenses. Therefore giving you the opportunity to maintain your standard of living without being dependent on work. This goal requires a healthy mindset and habits, as well as long-term planning.

Passive income: 3 fundamental steps to avoid failure

Before you can generate passive income, regardless of the type, it is important to understand that there are three fundamental phases to follow:

  • Preparation: i.e. acquiring the knowledge and skills necessary to avoid wasting time and money;

  • Action: that is, putting into practice what you have learned;

  • Control: essential to generate passive income effectively.

It is important to keep in mind that the first two phases require more effort than the control phase.

It is important to have initial capital to invest. But this can range from a few hundred to tens of thousands of dollars or more. It depends on multiple factors. But let’s get to the gist.

5 ways to make a living from investments

As anticipated, below you will find the 5 main ways to create recurring passive income and achieve financial freedom.

First of all, it is important to underline that each of these tools requires a path of preparation, action and control, as I explained earlier. The work and time needed to generate passive income vary based on the type of investment you decide to undertake.

Financial income

And here we open the first chapter. There are probably more than 10 different financial instruments, including stocks: bonds, mutual funds and ETFs. These instruments can provide recurring passive income, such as annual dividends or coupons.

Furthermore, they can be bought and sold. Depending on the type of investment, they can generate approximately between 3 and 6% per year. A well-studied strategy should also include a diversified portfolio of financial instruments in order to generate passive income.

What if you start with little? You don’t have to worry, even an initial capital of a few hundred euros, to be set aside monthly, can be sufficient. In this case, a recommended approach is the PAC (Capital Accumulation Plan).

Real estate investments

An income from real estate is obtained, mainly through the rental of a property. In this case the budget to invest varies depending on the method of acquisition of the property. For example: balance and write-off or real estate auctions.

Furthermore, it is possible to obtain passive income from properties without being the owner, through the sublease. That is, you have a rental contract for a property that you in turn rent to third parties.

Staking cryptocurrencies

Staking is a classic of passive income in the cryptocurrency market. In fact, it allows you to make a profit simply by blocking a coin or token. Not in fiat currency (traditional euro or dollar) but in crypto.

Crypto staking is one of the favorite choices even for the most experts. Proof of Stake is, in fact, a system that is used to keep the network in which cryptocurrencies travel safe. The Proof of Stake is therefore the mechanism that allows you to block coins, “stake”. Furthermore, our savings are not subject to inflation.

Royalties

In this category we can collect all the sources of income, which can derive from your personal skills and passions:

  • Copyright income: from books, songs, artwork, photographs and more, that you have written or created yourself;

  • Trademark and patent royalties: arising from trademarks you own or inventions you have patented;

  • Software creation income: From software you create that you can sell or rent.

To create these sources of income, you need to have specific skills or talent in a certain area, such as writing, photography, art, programming, and so on. In recent years, many “nouveau riche” have earned huge sums through their skills and the creation of smartphone software or applications. Furthermore, the initial investment required for this type of income can be very low.

Investments deriving from the web

Thanks to the Internet, many earning opportunities exist today that were previously unimaginable. Here are some examples:

  • Affiliations: Many companies offer affiliate programs on their websites. By using promotional links or banners, you can advertise their products and earn a commission for each sale;

  • Dropshipping: You can create an online store without having to have a physical warehouse;

  • Online advertising: as in the case of affiliate programs, you can place advertising on your site or blog via platforms such as Adsense. You get paid per click (even just a few cents) or for each sale you make. Alternatively, you can sell advertising space directly to interested companies;

  • Info-products: You can create and sell an info-product (such as an ebook, a video course or a podcast) through your website or blog. Alternatively, you can purchase resale rights to info-products created by other people;

  • YouTube: In recent years, the profession of “youtuber” has become increasingly popular. By earning through advertising displayed before or during their videos, YouTubers can generate profits. Furthermore, Youtube offers many really interesting tools such as Cash Cow Channels, perfect for generating passive income over time.

Conclusion

Passive income, therefore, represents an effective way to generate income, without having to actively work to earn it. However, to earn consistent passive income you need to invest time and money in building a diversified portfolio.

It is important to understand the risks associated with different investment options. And make a realistic assessment of expected returns. With careful planning and management of your finances, passive income can be a stable and reliable source of income for the future.

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