When many people think of the best passive income streams, they think of quarterly or monthly income earned in the form of rent on properties owned, dividend income or distributions on partnerships in business ventures. Being able to expand your own preconceived notions on what it is to earn money passively.
When you think of passive income streams, what most people think of is earning money without having to make intense decisions about management. I know that early on in my investment career, I thought of passive income the same way the Saudi Royals earned their “allowance”. I thought to myself, “Hey, wouldn’t it be nice to earn an income every month and not have to think about where it came from?” In a way, I was thinking of a passive income stream as a form of “Universal Basic Income”.
One truth you may need to realize, is with your own pursuit of passive income, there is much more involved in getting to this mythical “unearned” passive income stream. If you’re choosing Real Estate as your preferred “passive” stream, you’re going to find headaches and illiquidity at every turn. With bonds that pay coupons, you’re going to find yourself waiting a long time in between payments (bonds typically pay coupons semi- annually), while your bonds may fluctuate in value with movements in interest rates.
One of my goals with this website is to give you a realistic view of how to make it to personal financial independence. I am not going to tell you to start a YouTube channel and try to make it big, or do online surveys to make extra money. The goal here is for simplicity and a high success rate.
Investing in the stock market and building your own portfolio is the best passive income stream possible for the money. Your assets are liquid, you can sell at any time. Plenty of top stocks earn a quarterly dividend, you can generate an income, WHILE being diversified outside of one specific avenue, and you will be able to sit back and not think about the possible headaches and superfluous fees impacting your gains.
From 1993-2019, the S&P 500 has returned .86% per month. You can think of this as a revenue stream. A $100,000 investment would earn an average of $860 a month. This is freely accessible to sell whenever you like, and as of today, without any commission to your broker on the way in or way out.
Keep the idea of building your own portfolio at the front of your mind when searching for your passive money maker. It can make the road to financial independence much smoother.