Why Passive Income is Relative
A common misconception about passive income, is that true passive income must involve no work by the investor what so ever. In reality, no income stream is truly passive. Investments vary in passivity according to the active tasks involved. In addition, the same investment may be passive to one person but more active to another. Once you begin to understand the concept of relative passivity it will be easier for you to choose the investment vehicle that is right for you while being the most profitable in the long run.
On the scale of passivity real estate and stock market investing rank pretty high, while a 9-5 job and Ebay businesses are placed lower on the continuum. An important trend to note is that the most passive investments tend to be the most expensive. Real estate and stock market investing have relatively high barriers to entry- they require a little bit more capital to begin with, and in some cases healthy credit scores. This is a great example of the saying “it takes money to make money.”
One of the trends that makes passive income so relative is that the higher you climb on the scale of passivity the less passive other lower investments will appear to you. For example if you are putting in very little effort and making money in one of the most passive investments out there, stock market investing, passive income blogs may seem like too much work for too little reward- to you the work you’d have to put into a blog would make the income less passive. However, if 100% of your current income comes from your job, blogging may seem like a fun, easy, way to generate passive income.
Passive income has been identified as one of the most important aspects of financial freedom. For the majority of Americans the best way to reach this elusive goal would be to work your way up the ladder- starting at your job, and rolling capital into bigger investments until you reach bulk candy vending, or ultimately real estate investing.
If you already have a lucrative career you can start higher on the ladder- that’s one of the best things about passive income, no matter what your current financial or personal situation there is an investment vehicle out there for you! Another way to think about this concept is using the idea of residual income as a replacement term for passive. There are any number of ways to achieve this type of income, from affiliate programs online to other sources of real-estate, licensing, patents and such vehicles. In other words, it may take work so the passive nature is somewhat removed, however, there is a larger potential to receive residual income from the efforts for years into the future.
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