What separates the rich from everyone else are two things: firstly, the wealthy derive most of their wealth from income from owning assets, compared to everyone else whose income is primarily derived from wages income, and secondly, because of the way that the tax laws are organized, they are able to pay substantially lower tax rates than everyone else. The road to financial liberation starts from accumulating assets and reducing liabilities. Owning assets allows you to earn income passively, without directly working for it. Jeff Bezos may have become the richest man on the planet while running Amazon, but it was not his position as chief executive officer which made him so rich, it was his ownership of Amazon stock. He could easily stop running Amazon, as he has done now, without impacting his wealth. In this article, we will discuss how you can earn passive income with an investment.
Typically, people assume that you need a fortune to invest, but the reality is that you can invest with very little money. Here are some ideas.
1. Invest in Fractional Shares
Brokers such as Charles Schwab, Fidelity, Interactive Brokers and Robinhood allow retail investors (individuals like you and me) to buy bits of shares in companies. Here’s an example. Supposing you want to buy shares in the investment group, Allstate Corporation. You check the stock price and it’s about $127, but you only have $30. With fractional shares ownership, you can buy $30/$127 worth of stock. Fractional share ownership opens the door to owning stocks regardless of your budget. SOme brokers have a minimum investment, such as $10, but that is hardly prohibitive.
2. Real-estate crowdfunding
Owning real estate is one of the great sources of passive income. The wealthiest people and families in the world invest in real estate. Bill Gates has become the largest private farmland owner in the United States at a time when many investors are focused on the latest tech craze. Land is a permanently scarce asset. There can never be a “discovery” of new land, at least on this planet. So as populations rise, and with it, demand for land, the supply of land remains fixed. This isn’t to imply that the price always goes up, rather, that in the long term, assuming a good location, the price generally goes up. By its nature, real estate is an illiquid investment better suited for long-term investors. Don’t invest thinking you’ll get a return tomorrow. Think in terms of years. Supposing all you have though is $500? With real estate crowdfunding, you can participate in owning real estate, by investing in common with a crowd of other investors. You can visit real estate crowdfunding sites such as CrowdStreet, Equity Multiple, Fundrise, Peer Street, and Realty Mogul to get started.
3. Get a Side Hustle
In today’s world, a “passion economy” has emerged in which it has become possible to earn an income by tapping into a passion which you share with other people. Kevin Kelly argued that it was possible to build a highly lucrative business by engaging with just “1000 true fans”. Some have argued that with just “100 true fans” it is possible to earn a substantial income. You can teach courses online on Teachable, Thinkific, or Udemy; write a newsletter on Substack, host a YouTube channel or some other activity. The costs of starting up are fairly low. To write a newsletter, you don’t need any money at all, just your passion.
This list isn’t definitive. There are many other ways to earn passive income. You can invest in alternative assets with Regal Assets; invest in an IRA for your retirement; invest in high-yield ETFs or mutual funds; among other solutions. If you understand the principles of passive investing, you can set yourself up to financial independence.