Passive income can come from investments that pay you dividends and interest you earn from your share holdings. You'll get a shot at achieving financial freedom If you're the sort of person who really values peace of mind and who doesn't want to be kept awake at night worrying about market volatility, investments that generate passive income are likely to be a great fit for you.ġ. They're also more suited for long-term investing, so you don't face as much stress over having to 'time' the market accurately, buying when the price is at its absolute lowest and selling at the top. This makes them a relatively stable part of your portfolio you don't need to spend as much time monitoring them. Revenue streams and income flow on these types of investments are relatively stable and more predictable as they're less volatile than other investments - they don't go up and down in price as much. You are unrestricted by geographical boundaries and there are enormous opportunities to scale up.Now that you understand the fundamentals of passive investing, the next question you'll likely have is: what passive income ideas are there to explore? Passive income is usually generated from investments that carry lower volatility, such as dividend stocks, bonds / certificates of deposit and life insurance plans. “Automation and other forms of technology have opened up many new avenues for generating passive income. You’ll enjoy extra flexibility and security when you are no longer solely dependent on a job income to cover your living expenses,” says Shafeeka. “Once you are committed to putting in some initial work, your efforts should pay off. Read more | New to investing? Here’s a guide to understanding TFSAs, EFTs and saving in money market accounts It would be unwise to withdraw hard-earned funds from an investment to start a new venture, without being aware of the short-term tax and long-term retirement implications. Some financial services groups offer collective buying home loan schemes.Īppoint a property manager and delegate the property management.įinally, discuss your plans with your bank manager or a trusted financial adviser who understands your short, medium and long term goals. Pooling resources with friends could enable you to enter the property market, or to buy a larger property. The Satrix Dividend Plus Index Fund, for example, consists of 30 high dividend-yielding companies. Rather than trying to pick individual shares, try investing in a unit trust geared at generating high dividends. Keep in mind that you will need the approval of your landlord and body corporate and, in the case of your car, you will require your insurer’s approval.īe sure to also check for a potential increase to your excess or premium. If you do not own property, you can sublet a room in your flat, a parking space, or even your car. Pooled money earns better returns because of the higher capital, and shared fees are lower. Automatically transfer a portion of your pay cheque into a savings account, or join a reputable stokvel. Set clear financial goals and develop a budget in order to build up an initial lump sum. The classic how-to book on passive income is The 4-Hour Work Week, by Timothy Ferriss. You can, however, start off on a small scale. Generating passive income does require an initial investment of time and money, and you may need to acquire additional assets and skills. Read more | ‘What’s the difference between capital gains and income tax?’ – Aus Nthabi answers legal questions You can then sell this product online using automated payment options.” “Another option, if you spot a product gap in the market, is to hire a freelance industrial designer to develop a prototype and then take it to a contract manufacturer. “If you have expertise in a particular sector, you could create a teaching product to pass on your knowledge,” says Shafeeka. Importantly, passive income is not a second job or side-hustle for which you need to do ongoing work in order to receive payment, says the .za marketing manager.Įxamples of passive income include renting out a property, earning dividends from shares, writing a book that you can self-publish free on Amazon, or reselling photographs through an agency such as Shutterstock or Getty Images. Passive income is generally earned with minimal labour and involvement on your part, according to Shafeeka Anthony.
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