The idea of building wealth through passive income has understandable appeal, especially if you’re worried about being able to save enough from your work earnings to meet your retirement goals. Especially with out current challenging political and economy environment.
The environment has teaches us that nothing is permanent. In order to secure our living lifestyle, we do need to so something about it starting from now. We as a human are also in a risk of not being able to work to generate income at anytime. We might be retrench or having some health issue that refrain us from working.
What if this happens? Will the rest of you and your family life been taken care off? Is our EPF enough to support us? Hence to build a sustainable passive income to achieve those financial freedom is the solutions to the problems. That is how rich did it too.
For example, to generate $1,000 a month in retirement income from a portfolio, you’d have to amass about $250,000, assuming a 5 percent withdrawal rate. Better to generate a stream of income using creative avenues.
Investopedia defines passive income as “earnings an individual derives from a rental property, limited partnership or other enterprise in which he or she is not actively involved.” Popular culture, however, defines it as “any money you earn while sitting on a beach sipping mojitos.”
Untold thousands of people have tried to create fruitful passive-income streams only to be surprised by the amount of work, cash or time involved. So if you’re thinking about going down this road, check out the reality behind this 2 types of passive-income strategies.
- Invest in Rental Properties
One of the most popular investment is on rental properties. It has been proven to be an effective and time-honored way of earning passive income. Nonetheless, it often requires more work than people expect. If you don’t spend the time learning how to make it a profitable venture, you could lose your investment.
To earn passive income from rental property, You must determine 3 things: the return on investment you want to have, the property’s costs and expenses, and the financial risks of owning the property.
For example, if your goal is to earn $10,000 a year in rental income and the property requires a $2,000 monthly mortgage plus an additional $300 a month in taxes and other expenses, you’d have to charge around $3,150 in rent monthly to reach your goal.
Now, the question becomes one of risk: Is there a market for your property? Might you get a deadbeat tenant? Will your tenant damage the property? All of these could result in a sizable dent in your passive income.
You have to know your area and tenants really well. If not, you could get crushed, and it would take years to recover.
2. Stocks Dividen-Yield
Shareholders of dividend-yielding stocks receive a payment at regular intervals from the company’s profits or reserves. Since the income received from the stocks isn’t related to any activity other than the initial financial investment, owning dividend-yielding stocks can be one of the most passive forms of making money.
The tricky part, of course, is choosing the right stocks. There are too many novices jump into the market without thoroughly investigating the company issuing the stock. You’ve got to investigate each company’s website and be comfortable with their financial statements and you should spend 2 to 3 weeks investigating each company.
That said, there are ways to invest in dividend-yielding stocks without spending too much of an initial time investment. Its advisable in going with exchange-traded funds, or ETFs. ETFs are investment funds that hold assets such as stocks, commodities and bonds, but they trade like stocks.
“ETFs are an ideal choice for novices because they are easy to understand, highly liquid, inexpensive and have far better potential returns because of far lower costs than mutual funds.
Similarly, real estate investment trusts, or REITS, are a good choice for passive investors, although Graves warns that they’re pricey right now. With REITs, you can do the research in a much shorter period of time. Your level of understanding doesn’t have to be high to make a (sound) investment.