God of Finance and Investing

5 Passive Income Ideas

Real Estate : This requires large capital as possessing property for this is a necessity. If you have a house you don’t live in then rent it out to someone. Depending upon the location of the property you can get more or less money for the plot. Even if you have a extra room in your own house you could rent it out to hospitality companies. If the property has growth potential then not only will the rent increase but the cost of the property will increase too. After 10 years a $30,000 property can even cost $100,000. It all depends upon the location of the property and how well maintained it is. You can make $500-1000+ per month passive income by renting out your property.
Dividend Stocks : A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders. If an investor has 10,000 shares of a corporation that pays $2.71 annually, he will earn $27,100 per year without doing any work. That’s passive income. An upside is that if the company shows growth and the price of the share goes up while you hold a stock, not only are you getting the dividends, you will get higher dividend returns. Also since the price per share will increase, you will make some profit per share.
Blogging : By creating a blog which attracts the right amount of traffic, you can create affiliate links with investment firms. Also many E-commerce websites promote affiliate marketing and you can earn a percentage of the profit per sale of the product linked to your blog. Advertisements on your blog will also pay you an amount every time a person sees or clicks an ad. You can also sell an online course based on a topic your blog is about, like cooking or maybe tech products.
Youtube : If your channel attracts enough traffic and views, you can monetize your videos and get paid by displaying advertisements. Also once your channel is big enough, sponsors will pay you to talk about their company or product in your videos. You can again use affiliate marketing links in the description box to earn more money and even talk about your blog to attract more traffic there.
Peer to Peer Lending / Loans : Everybody has a friend who needs some money urgently hence you can lend a friend some money at a fixed interest rate just like a bank would. Since it’s a friend, a mutual trust will be established between both the parties. After all, a human-human connection is better than a human-bank connection. $10,000 at 7% can get you 700$ with ease.

GOOD LUCK FOLKS THAT’S IT

DIVIDEND STOCKS : An introduction to passive income

Ever heard of making money while you sleep? Yes it exists and comes in the form of passive income. Now you would be wondering what is passive income and what is active income. A job where you work all day and get a pay check at the end of the day or month is a form of active income .

Passive income is income resulting from cash flow received on a regular basis, requiring minimal to no effort by the recipient to maintain it. Earnings derived from a rental property, limited partnership, Dividend stocks or other enterprise in which a person is not actively involved. As with active income, passive income is usually taxable. However, it is often treated differently by the Internal Revenue Service (IRS).

WHAT ARE DIVIDEND STOCKS?

A dividend is a payment made by a corporation to its shareholders, usually as a distribution of profits. When a corporation earns a profit or surplus, the corporation is able to re-invest the profit in the business (called retained earnings) and pay a proportion of the profit as a dividend to shareholders. An example is Realty Income Corporation (NYSE: O), this is a real estate company which pays monthly dividends. They pay 22.65 cents per month or 2 US dollars and 71 cents per month for one share. So if an investor has 10,000 shares of realty income, he will earn $27,100 per year without doing any work. That’s passive income. An upside is that if the company shows growth and the price of the share goes up while you hold a stock, not only are you getting the dividends, you will get higher dividend returns. Also since the price per share will increase, you will make some profit per share. Now that’s just icing on the cake with the cherry on top.

MY ADVICE : I personally recommend reinvesting the money you get from dividend stocks to buy more dividend stocks. In the long term, the dividends will pile up and undergo the magic of compound interest which will make your money multiply.

What are MUTUAL FUNDS and how do they work?

As we have seen in advertisements, people encourage others to invest in mutual funds. But what are mutual funds? here’s a simple explanation and how they work –

Mutual funds involve you, your money and an asset management company (AMC).

So how do they work? Mutual funds involve you giving your money to an AMC and the AMC on your behalf invests in different sectors like the stock market, goverment bonds, corporate bonds , etc.

These AMCs have assigned professionals who study the market carefully and invest in the best markets possible with minimum risk and high reward. But there is still risk involved depending upon the type of mutual fund you invest in. AMCs also take a small percentage of your returns (1-2%) as a fee for investing on your behalf.

There are 3 types of mutual funds – Debt, Equity and Hybrid.

Debt mutual funds – invest in bonds, debentures, certificates of deposits, etc. they are low risk low return funds.

Equity mutual funds – invest in the stock market therefore carry higher risk but significantly higher returns compared to debt mutual funds. They diversify the investments and invest in large cap, small cap and mid cap companies. The investor can choose the type of equity fund and the size of the companies usually.

Hybrid mutual funds – the best of both worlds, it’s a mix of equity and debt mutual funds. the investor can fix the ratio like 70 debt and 30 equity (passive mutual funds) or 30 debt and 70 equity (active mutual funds). This allows a greater diversification so even if the money fluctuates in the stock market, the debt funds will remain stable.

Comparison of return percentages of Indian mutual funds

ROTH IRAs – All you need to know

Roth IRAs are special individual retirement accounts that offer valuable tax benefits, including tax-free growth on your investments.

How does a Roth IRA work?

A Roth IRA is a retirement account that encourages you to save by offering you a tax benefit. Unlike with a traditional IRA, your contributions to a Roth IRA are not tax-deductible. But those contributions and your investment earnings grow tax-free, meaning there’s no tax on your Roth IRA withdrawals in retirement. With a traditional IRA, your withdrawals in retirement are taxed as income.

Like a traditional IRA, a Roth IRA is an account that holds your investments, rather than an investment itself. You open a Roth IRA at a brokerage or bank, then select what you want to invest in, such as mutual funds, stocks, bonds, exchange-traded funds (ETFs) or bank savings products. (For a long-term goal like retirement, we recommend investing in stocks and bonds because of their higher returns. That means opening your Roth at a brokerage or robo-advisor rather than at a bank.)

A Roth IRA is an individual retirement account that offers tax-free growth and tax-free withdrawals in retirement. Roth IRA rules dictate that as long as you’ve owned your account for 5 years and you’re age 59½ or older, you can withdraw your money when you want to and you won’t owe any federal taxes.