Why Guaranteed Passive Income Is a Myth — And How To Earn It for Real
Written by
Catherine Collins
Edited by
Amen Oyiboke
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Earning passive income is something many people want to achieve. However, there are a lot of myths circulating about passive income. Some businesses promise courses and systems that can teach you to earn money while you sleep.
The truth is, though, earning passive income is something that takes experience, planning, and, most importantly – time. Below are three myths people circulate about passive income that you should know about, along with three legitimate, practical ideas for earning passive income over time.
Myth 1: Quick Success
Many so-called “gurus” online promise quick success when it comes to passive income. They might claim to have an investing system that beats the odds or a sales strategy that helps you sell products night and day.
These promises sound impressive, but in reality, they’re red flags. Creating passive income is more of a gradual process. It takes time to reap the benefits of long-term investing. Building businesses also takes consistent effort. Learning how to market and sell products takes trial and error.
If you’re willing to work consistently over time and withstand ups and downs, you can eventually create passive income streams. But it’s unlikely you’ll get there quickly or that success will happen overnight.
Myth 2: Set It and Forget It
Many people think the work is done once you’ve reached your passive income goals. However, passive income isn’t something you can achieve and then forget about. Typical passive income streams, like real estate, take a lot of active management. Even if you outsource to a property manager, you’ll still have to make decisions, answer calls, and handle major issues.
The same is true for investment income. When you reach financial independence, whether from your retirement accounts, dividend income, or another type of investment, you still need to monitor your portfolio. There will be times when some funds aren’t performing as well as others, for example, and you might need to adjust your holdings. Or, maybe a fund is doing great, and you want to buy more. Either way, it’s essential to pay attention to your portfolio.
Myth 3: Passive Income Is For Everyone
Many people want passive income, but one form won’t be right for everyone. After all, people have different goals and vastly different risk tolerances. Some people want to invest conservatively, while others are willing to take more risks.
People also have different skill sets and experience levels. For example, a contractor or real estate agent might be more willing to invest in long-term rentals, and someone with a marketing background might be more willing to try building an online business.
3 Ways To Earn Passive Income
There are many different ways to earn passive income. Below are three ideas.
Dividend Investing
Certain stocks are dividend-paying stocks, meaning that investors get a portion of the stock’s earnings. If you buy and hold these stocks over time and grow your portfolio, it’s possible that you can get a consistent stream of passive income in the form of regular dividends.
Build a Business
There are many different types of businesses. Usually, starting and growing a business is a very active process. Over time, though, it is possible to scale your business, hire staff, and sell products and services online to create a passive income system. Like other forms of passive income, building a business will require different levels of management and monitoring depending on what it is. However, over time, it is possible to earn money from your business sales through passive avenues.
Real Estate Crowdfunding
Real estate crowdfunding is different from owning a rental property with a tenant. Instead, you invest in a project with several other investors. Usually, you can find these opportunities on real estate crowdfunding platforms. The platforms are like middlemen, connecting property developers with investors who want a hands-off approach to real estate investing. So, you could own a small portion of an apartment complex, for example, and as the developer earns money from renters you get a portion of those funds as your return on your investment.
If you want to earn passive income, it’s a good idea to start the process with your eyes wide open. Try not to be swayed by promises of quick success or overnight income. Instead, be prepared to spend time learning about different passive income streams and choosing one that works best for your goals. There are many different ways to earn passive income, but some of the most common ones are owning real estate, building a business, and long-term investing.
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