It’s the stuff of dreams – making money no matter how little work you do.
Unsurprisingly, like all dreams, they’re a lot harder to turn into reality than we might all like. But what realistic ways are there for the average investor to earn passive income?
The Stock Market
Possibly the best-known of all residual income opportunities is the stock market. Seeing as recent research has suggested that low-priced index funds tend to beat active investors time and again, possibly the safest route is simply to “invest and hold”.
Select a plain, boring old fund and just keep on paying in, month after month. As your fund grows, so it should start to accumulate capital growth. If you have the self-discipline, keep on reinvesting these funds into an ever larger portfolio.
That said, broadly speaking most experts utilize the “4% rule” which simply specifies that based on historical stock market cycles you should be able with safely withdraw 4% of your funds each year without negatively impacting the overall capital volume. This means you’re likely going to need a considerable portfolio balance before you can live the good life on it.
We know that authors like JK Rowling and musicians like Phil Collins make huge sums of money from royalties each year, but don’t necessarily think that you need to create a best-seller in order to earn residual income from royalties.
Thanks to the Internet it’s getting ever-easier for normal everyday folks to earn royalties. Just a few examples include:
Photographs – Sites like Big Stock Photo allow anyone to upload their snaps and earn royalties every time someone buys one. With earnings of up to $25 per photo, these royalties can quickly add up for experienced photographers.
Ebooks – Amazon allows anyone to write and publish Kindle ebooks. While it’s becoming ever more challenging to break into this market, a well-written ebook can continue to sell for years into the future, producing monthly residual income.
Software – Creating your own software that can be sold over and over again is yet another example of potential residual income. Even better, thanks to outsourcing sites like Upwork you don’t even need to be a programmer yourself; instead you can hire an experienced coder to make your software for you.
Another classic example of residual income comes from buy-to-let property investments. Of course, managing properties can take time and effort, so if you’re looking for totally residual income it is wise to take on the services of a property manager.
A small number of property investment companies actually offer managed properties, taking all the hassle away from you.
While many small business owners work long, hard hours, business ownership can be turned into residual income with the right plan.
The goal is to start a business that, over time, can be taken over by your employees.
Classic examples of such businesses are those run to a specific formula, which can be taught to anyone. Catering and hospitality are two great examples. You can even fast-track your way to residual business income by investing in a management franchise where effective systems are provided on day one.
As you can see, residual income doesn’t necessarily have to be the stuff of dreams. While, in truth, you’ll likely need some capital to get started, there are so many opportunities that even small investments can make a difference. This can grow considerably if you’re willing to re-invest your profits to grow your ongoing income.