How to Build Wealth with Passive Income

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What is Passive Income?

The idea behind passive income is pretty amazing. You earn money without having to put in additional time or energy. This means the number of difference assets that you have generating passive income can really scale almost infinitely. Say you have an asset that generates some amount of income and does not cost you any time. Whatever amount of income that may be, it costs zero time which means you can manage an infinite amount of these, which gives you opportunity to earn an unlimited amount of passive recurring income.

After you put in the initial time or monetary investment to establish an asset that can produce passive income, you will realize you still have more time to be productive. You can invest this time in building your next income-generating asset.

How to Generate Passive Income

Passive income is not easy, and it will typically require an upfront cost of one or two types. This will be in the form of either a monetary investment or a time investment. If you have money available you can immediately invest it in assets that will produce passive income. And really smart investments alone can make anyone rich. If you're short on cash or have most of your funds invested already though, you can still aquire assets that generate passive income, you will just need to use "sweat equity". That means you can put in your own time and bootstrap the project by yourself, from the ground up, at no or very little cost. This method of creating assets and generating passive income is challenging, but absolutely anyone who is determined and smart enough to build something themselves can succeed.

Why Invest in the Stock Market?

The stock market is a great option for people who are interested in passive income. If you are looking for a monetary investment that can generate significant income, there are many opportunities in the stock market. If you don't have as much money to invest immediately you can instead put in time and learn and study companies in order to improve your returns. Either way, the stock market is a great option that can be super versatile, give great returns, and provide investors with many options regarding how exactly they want to create and diversify their portfolio.

There are a ton of free tools available that can help maximize your gains while minimizing how much time you need to spend tracking and keeping up with your portfolio.

Most brokerages charge you a few dollars per trade in the stock market. If you make a few hundred trades a year this could easily cost you thousands and eat into your potential returns. Robinhood however, lets you trade for free, it is an excellent tool. Make as many trades as you want, day trade as often as you want, and don't worry about fees and costs eating into your profits. For those willing to invest time, you can do your research and learn about the stock market in depth. If you can beat the market, you can expects annual returns upwards of 10% and possibly significantlly more.

For those who aren't interested in investing their time, there are many alternatives. Roboadvisors such as Wealthfront can manage your portfolio for you. Additionally, they will manage the first $5,000 that you invest in their platform for free. After that they charge a considerably small fee of only 0.25% (only a quarter of a percent). If you had a $50,000 investment, you would only owe them $112.50, while your return would lie in the thousands. Over the last 90 years, the S&P has had an average return of 9.8% a year, which would net you $4,900.

Clearly, the stock market is a versatile option for investors of all types. It provides diversification and the ability for investors to invest with their own level of risk and volitility. For those interested in passive income, educate yourself on the stock market. With the long-term potential of annual gains exceeding 8-9%, the opportunity cost of not investing is probably way more than you think.

Get more time back
Hey, I'm Nicholas Dill.

I help people get more of their time back by sharing everything I know about automation and productivity.

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