The term passive income is often associated with money appearing magically without effort while you sleep on a beach. However, when discussing real passive income, you need at least an initial struggle and effort to make it work. Apart from myths and illusions taught by fake gurus and scammers, there are legit ways to build and generate passive income. In this guide, we will list some of the best methods used by smart people that actually work in real life.
Passive income myths
There are many myths surrounding passive income, as this term is very popular and attracts many scammers and fake gurus. The three main myths are zero ongoing effort, get-rich-quick schemes, and the no money needed illusion.
Myth 1: Zero ongoing effort
Passive income is generated using susbtatnial upfront creation, setup, or investment. If someone promises you to generate money without any effort, it is surely a scam or a lie. An online course might take hours from your to create before earning monthly income.
Myth 2: Get-rich-quick
This is probably the oldest trick used by fake gurus. You need consistency to build methods that generate passive income. A blog might need 50+ posts to attract users and generate money from ads. Real wealth is built over time with consistent effort and commitment.
Myth 3: No money needed
This is also a popular one. While some digital products start cheaply, rental properties or stock investments require large capital. While some platforms are allowing you to invest in real estate with small capital, you still need to have some bucks.
Copy trading - Outsourcing financial trading
One popular method among retail investors is copy trading. It enables anyone to replicate fianncial trading perormance of profitable traders. Imagine generating same profits as someone who has years in stock trading experience and can generate conssiten profits. Copy trading allows you to achieve this and is probably by far the best passive income generation tool when used wisely. The risks include fake gurus and scams, and you still need time and effort to find reliable strategies to copy and then diversify across several strategies to ensure you're not exposed to a single copy trading strategy. When done correctly, by mitigating all the risks mentioned, copy trading is very promising.
Dividend and index fund investing
The safest and easiest way to generate passive income is to invest in dividend-paying stocks. As you would have already guessed, this method requires you to deposit substantial amounts to generate tangible income that can impact your financial life. One solid method is to allocate a certain percentage from your monthly income and invest it in stocks consistently, therefore, build wealth over time. This method is very useful, as very few people have large capital to buy lots of dividend stocks right away, and slowly allocating a percentage of your monthly salary or income can prove life-changing. Index funds are another great way for beginner investors to build their wealth, as these funds do not require much knowledge and understanding of financial markets.
Real-estate
This is a heavy hitter of passive income. Real-estate is low risk high reward endeavor but just like dividends, requires a substantial capital. However, if you have some savings that you can allocate to this sector, then passive income is relatively easy to build. Just buying a renting out apartments in a flat in a good urban area is a basic technique here. Some investors go so far as to deposit their money in a bank account and then take a loan to buy an apartment, then rent out the apartment and pay back the bank loan using this rent revenue. This way, it is possible to acquire an apartment with very little down payment. If your real estate value increases, you can simply sell it for profit.
Staking, yield farming, and liquidity pools
This is similar to depositing your money in a bank account to generate a passive percentage annual yield. However, unlike banks, crypto staking offers higher percentages, sometimes even higher than 10%, depending on the crypto project. You need to select legit and reliable projects to ensure risks are low. Yield farming is when investors deposit crypto into DeFi liquidity pools to earn trading fees and governance tokens. These yields can be anything from 10% to 500% APY when dealing with high-risk pools. However, it requires deep knowledge of blockchain technology and Decentralized Finance to employ this method. Crypto investing is generally a high-risk, high-reward endeavor, and only people who understand the technology and know how to spot scams can generate profits.
