Dec 30, 2016 | Passive income
Why is a human being so driven by addictions? I have been trying to implement the resolutions for AD 2017 the the past few days, ad one of them was to give up on little addictions, like coffee, coke and wine. But, I helplessly I observe how giving up on one addiction immediately results in hatching another one. This time I tried to give up coffee and coke, and in a result, the consumption of wine immediately grew by miles.
This Christmas, I also spent some time on procrastinating and googling around. There is a saying that you should probably choose a profession closely related to the things you use to procrastinate on. If this is true, I should be a professional money maker, because looking up my googling history, I can find a lot of queries such as ‘how to make money without effort’, ‘how to be rich’, ‘how to make money on watching youtube videos’ et cetera. The peak of my interest in those is usually around Christmas because I have more free time then, I can go through all my financial operations from the past year, revise whether they were any close to optimal, and whether it is worth to try again.
This time, I would like to give a summary of what I found out these past few days about the idea of “passive income.” Passive income became a popular key term over past few years. It comprises all the possible ways of making money which you initiate and then can let go, so that the money, in a word, keeps on producing itself. Most of the time, passive income relates to online activities, such as writing e-books and selling them on Amazon Kindle website, releasing an online course which can be downloaded at a price, releasing popular youtube videos so that you can capitalize on advertisements, affiliate marketing, Fiverr freelancing (which means that you can offer any service at a fixed price of five bucks), launching an online business that can be automated to a high extent such as an online store with one or two employees, etc. There are multiple YouTube channels fully dedicated to the idea of a passive income. Most of these videos are appraising and very enthusiastic. However, it is a small-world dynamics and it can never happen that everyone is making a fortune online at the same time. Those who really make up for a living from their online activities are rare and passive income is no longer as passive, since they do it full-time. I think out of all the videos I watched, this one was the most sincere about what passive income really means, and what are the pros and cons:
This video really woke me up from the childish dreams of having a self-sustained business at no cost. The ugly truth is that an online business never rolls on its own, and it is very hard to find a niche where money can be created easily and without any competition. After watching a bunch of materials, I was more and more certain that to a researcher on a full employment, there is one possible way of getting wealthy:
1. Buy a real estate, possibly a property that needs a little makeover,
3. Improve the property, rent in out and start saving money,
3. Play with this money on the stock exchange, or do other forms of trading.
4. As soon as you reach a level when you have enough money for buying another property, pull out the money from the stock exchange and come back to point . Iterate.
This strategy does not require you to act on the daily basis, this is why it can be pursued next to the daily job. Buying real estate is not something that you just do on a daily basis. Of course, sometimes, there is an action to take on my to-do list: if one tenant is leaving the house, I need to search for another one. If something breaks, I need to call a makeover guy and pay for the maintenance. Also, if the company I invested in is in trouble or the market starts changing, I need to give it a thought and reinvest into another company or another market. However, I do not spend more than one or two hours per week on all of this, so I guess, given that my assets are steadily growing, it is a low cost to pay after all.
This is much lower time cost than in case of herds of home-grown you tubers who spend hours every day on recording new movies, or home-grown writers who spend hours every day on writing their e-books. One out of a million e-books then becomes a unicorn and starts making millions, but most of them will never pay back the time it needs to create. What is good about my strategy is that it does not depend on the fashion, or popularity. Investing in real estate will always make money, and the amount of money on stock exchange – despite every crisis on the way – is always growing in a long run. Just look back at how many percent did the every stock exchange grew in the last twenty years – you would never match this income by any interests from a bank deposit or governmental bonds.
One last thing I would like to show you is another wise Youtube movie I recently found. This movie is brilliant, yet it got a little attention since it was published. It is very straight to the point and perfectly pictures why some people are getting rich while others are getting poor:
I think it is so self explanatory that I do not really need to comment on this. I wish you all to have a great experience in 2017, and remember: buy assets, not liabilities!