The question of how you should be managing your money becomes increasingly pressuring, especially when you have no guidance on what you should be doing. Seeing many young adults promoting their passive investment opportunities with supercars and luxury items seems enticing, but these get-rich-quick schemes are often unreliable and can even be a fabrication of a scam. Here we will discuss some of the most reliable investments you should consider making if you intend to become financially free and earn from passive income.
Importance of investing
Hopefully, if you are reading this blog you already have a good idea as to why you want to begin your investment journey, but for those of you who are still yet to understand its benefits, there are a couple of things to understand. For example, you may have managed to save your money over time to buy holidays and save for a rainy day. Banks do pay interest for you holding this cash with them, however, the interest is often minimal and you don’t particularly get a large return of money.
On the contrary, investing your money into opportunities that are believed to increase your money over time can often have a much greater return on investment. You can make significantly more money if they go well, but if it wasn’t an educated investment or an unforeseen event happens, you could make a loss. When beginning your investment journey, you should never invest more than you can afford to lose. Experienced investors can make as many losses as wins, but the value or the successful investments massively outweigh any loss and therefore increase their income constantly.
What is Passive Income?
Passive income is the ultimate goal of all people after of course they eventually make enough smart investments to pass their work onto someone else to manage it for them. Passive income is monetary income that requires little to no effort to continue and maintain the cycle of income coming in. Often this income might come from the stock markets, property investing, or owning a share of a company that you don’t have to do any work for. Passive income can be an easier concept to understand when compared to active income. Active income is the result of money earnt a direct result of your work completed, for example, your 9-5 job provides you with active income between those set hours. Passive income is different as you are not exchanging your time for money, for example, you might be on a private jet to Monaco whilst earning capital appreciation from a property investment made a few years back. Both passive and active income require a level of input, but passive is generally more flexible and depending on the type of investment, it can make you money at every hour of the day compared to a 9-5, hands-on job.
There are many ways to generate passive income from investments, but if you are a beginner you might have to first start actively earning from your ventures before everything becomes streamlined and passive.
Property investing allows many avenues to make money from various strategies. For example, you can simply buy a property and rent it out as a buy-to-let. You receive money from the tenants and overtime will earn your investment back. This is perhaps the safest and less lucrative strategy.
You may also consider doing a house flip, and then either selling it with the appreciated value or renting it out once refinanced. The flipping strategy consists of buying a property that is listed at a lower value compared to the surrounding properties (residential or commercial) and then refurbishing the space to a standard that increases the property’s value. You then have the opportunity to refinance the property at its new value, pull your money out, and enjoy your high percentage return on investment. Anything involving property should be carried out with professionals who can make sure everything is done, regulated, and checked throughout.
Property investing can eventually become passive income as long as you gain the knowledge and experience of managing your tenants and properties first, before passing the responsibility onto others. You can reap the rewards of the rental income and also do this hands-free if you find a trustworthy management company. Businesses like these tend to manage void periods and move tenants in and out of the properties, so this is one of the upsides if you are hoping to earn passively through renting out your homes.
Stocks and shares are pieces of ownership in a company. Essentially companies sell parts of the business to overall increase and grow the funding into the business that they can reinvest. Some businesses sell huge amounts of stocks whereas other small businesses will just sell a small percentage to keep more in control. People buy stocks for a lower price and sell them for a higher price if the value of the company increases. Sometimes people can make a loss if the shares go down and the demand is low as there is no certainty on dividends. As a beginner to stocks investing, you may consider stocks and shares ISA as it is a much simpler start into stocks and shares. Although it is a lot longer, minimum 5 years, you will find more security as your funds are spread across many diverse industries to ensure if you do make a loss, you are generating interest elsewhere.
The foreign exchange market, also known as forex, is a worldwide market for exchanging national currencies. Various currencies are traded against each other as exchange rate pairs, for example, the British pound sterling and US dollar GBP/USD. You can earn from the difference between two currencies and profit from the changes in the rates. The forex exchange market was previously heavily dominated by large banks and firms, but now with the surge of online brokers and retail-oriented businesses online, the opportunities for individuals to invest have become easier to participate in.
There is a lot to forex trading, but the main thing to keep in mind is not just the potential of being at a loss, but the high risk of being scammed. With the huge amount of brokers offering the same services, many people have lost thousands to millions from being victims of forex trading scams. Make sure you do your research and invest in a mentor or a legitimate course. Forex trading is a strategy that will require you to invest your time and your money more than some of the other investments before they can become passive.
Affiliate marketing is another investing technique that you might want to consider if you have little money to invest but a lot of time in the beginning. Essentially it gives people the opportunity to earn money from suggesting the use of products or services to a targeted audience. If you already have a presence on social media platforms such as youtube, Facebook, or Instagram or believe you have the opportunity to do so, this might be a great passive income technique for you to consider.
In terms of how you can earn money from the scheme, if users buy products within links provided by the affiliate marketer in promotional content that links back to the linking company, the affiliate earns a commission from any profits obtained. Different platforms and businesses have various commission rates, however the larger your social presence you grow, the higher the percentage commission you have negotiated over time. This technique becomes passive in the sense that you will constantly be earning commission even months after making a post, as long as it is attractive content for your audience and you are affiliating with a desirable product.
Aside from social media affiliate marketing, you can also earn money through the use of starting your blogging website. You don’t have to use your account as your brand, and instead, you can create a useful blogging website for freelance writers everywhere to share their tips, tricks, and products they are trying to promote. If you have no idea on how to design a website, it is worth speaking with a design agency in Liverpool or Manchester based for some of the best talents in the country that specialises in creating the perfect websites for your niche. The same scheme applies here in which the more people click on the provided links within your site and buy into the product, the more commission you will receive. You might also charge people for posting their advertisements on your sites, as well as earning commissions on the click rates of customers. There are many creative avenues to generate passive income as a result of investing a short amount of time into creating a valuable blogging site.
Earning passive income might seem like a distant dream to you, but it is completely achievable assuming that you are willing to invest your time and money within the first few months, and potentially even years. Investing time, first of all, to educate yourself into all the strategies mentioned, and then also having competent knowledge on how to manage your money is key. If you have the facilities to do so, you should always invest in a financial advisor before you make any uneducated decisions that involve money. After a lot of hard work and patience, you might find yourself on the sweet path of financial freedom and reap the rewards of passive income.