Passive income makes money while you sleep

Passive Income Isn’t Effortless Income

The lazy never make it to passive income….

There’s way too much hype surrounding the idea that it’s easy to “have your money work for you” where you bring absolutely no skill, time, effort, or creativity to the table.  After all, why would any venture take you for just your money, when somebody else can front just as much cash with a lot more expertise?

Are there truly passive income opportunities out there?  Yes.  But you better be happy with 15% or less ROI on average. If you are competent in the stock market, options market, or you’re good at analyzing hard cash lending opportunities, it’s the most effortless money you can find.  But even then, you still need to know your stuff.

For example, if you want to make anything more than 6-8% annual in the stock market, buying and holding mutual funds doesn’t work.  You either need a reliable strategy for reading market trends, or have a reliable process for valuing individual stocks.

Options requires constant attention as your success depends on whether you take accurate short term positions in the market.

In terms of lending opportunities, the best that I’ve seen (that are legal) are generally lent for real estate deals.  That means if you don’t understand whether a deal makes sense, and understand the market that the property is in, you’re going to get yourself in to trouble.

In short there’s almost no passive income with a decent rate for return which is truly effortless.  Instead entrepreneurs and investors consider ways to “orchestrate” income.  It’s not about zero effort, but leveraging your effort such that you get paid back much more than you put in to it.

Amplify your effort….

The problem with working for income is that your ratio of input to output has a very limited upside.  You get a job that pays you $X an hour.  You can’t usually make a deal with your employer that every year you don’t get paid your salary increases 50% the following year.

But in business  or investing you can do that.  Your effort can compound on itself because you’re using a system that perpetually generates profit and grows.  $1,000.00 becomes $5,000.00 becomes $25,000.00 becomes $125,000.00 etc.  Is effort required? Yes.  But your ratio of input to output gets better year after year.

Most seasoned investors don’t look for real passive income opportunities until they’ve generated enough time intensive lump sum capital.  For example, most real estate investors will focus on refurbishing and flipping properties at a profit before they channel some of their cash flow into rentals.  I know many young guys who got into sales, worked their butts off for 5 or 10 years, and saved enough to start investing.  The idea is that you’ll need to build a decent nest egg of several million or more that will allow you to take advantage of hard cash lending, high performance hedge funds, fully managed rental properties or other lucrative income streams.

Up until that point, don’t be surprised if you have to get your hands a little dirty to keep your ventures growing.

Thanks for reading.

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About The Author

herbertkoehler

I am a college drop out who found my passion as an investor. I love the many facets of finance, investing, and business. But even more than that, I love sharing what I learn with others.

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