Today, we are going to get into some more advanced topics concerning passive income. If you haven’t read “How to Create Passive Income 101: For Beginners,” please do so before reading further. I am jumping right into the fire.
Intermediate Investing. Last time we talked about building a dividend growth portfolio. I love DGI portfolios, but today we want immediate income. We want to buy high-yield products that pay most of their profits in the form of dividends. We want to build an income portfolio.
There are many differences between a DGI and an income portfolio. Luckily, I have already written an article pitting these two against one another. “Dividend Growth Investing vs. Income Investing” should help you dive deeper into these two methods of investing.
Passive Income 102: Creating Passive Income for Retirement
To become an income investing, you have to understand the broader investing marketplace. You’ll have to understand inflation, interest rates, the Federal Funds Rate, the housing market, gold & silver, politics, and cryptocurrencies.
All of these external forces can weigh on the prices of your high-income products. For example, one of my favorite blue-chip stocks is Altria (MO). Altria produces cigarettes and other tobacco and nicotine products. Almost every week, some kind of political news comes out presuming the death of tobacco makers and the price of Altria tanks.
So, you need to read the articles and form a new investing thesis. If you still like the product, then you can buy more at a lower price. Each high-yield security has its own ups and downs and investment scenarios.
Mortgage REITs (mREITs), such as AGNC and Annaly Capital (NLY), trade based on the difference between short-term and long-term interest rates in the bond markets. As the yield curve flattens, their prices tend to drop. When short-term interest rates are low, and long-term rates are higher, then these mREITs perform great.
As an income investor who reads 1-2 hours of news every day, I learn these intricate details. I know if my mREITs drop in price, I am buying more to get an even higher yield. You can find some fantastic deals on the stock market, but you’ll have to know what you are doing.
Print Your Own Money
If you don’t understand the difference, there is more risk with buying a closed-end fund than a blue-chip stock. I love income investing because it is more hands-on. I also love having immediate income. Luckily, I have both types of portfolios so that I can enjoy both.
Speaking of enjoyment, I just finished an article titled “Passive Income: What Gets Rewarded Gets Remembered.” As you build your income portfolio, take the time to spend some of those sweet dividends on yourself. This helps you form positive habits around the act of investing.
Intermediate Real Estate. A great way to get into passive income from real estate is by investing in REITs on the stocks market. Everything I wrote about income investing applies here as well.
There are many types of REITs on the stock market, and each has its various investing purposes. You have Apartment, Single Family, Mobile Home, Data Center, Casino, Prison, Cannabis, Mortgage, Equity, Office, Farmland, etc. Know what you are getting into so you can profit.
What is a Sales Funnel?
It is also time to get into the physical world of real estate investing. The most important part of this stage is understanding that Real Estate is a Mindset (beginner, intermediate, advanced).
This statement means that you need to do everything in your power to reduce your housing costs. For example, if you are single, where do you live? If you are living in a single-family detached house, why?
If so, can you add in roommates so that you can become Mortgage Positive? You see, you don’t need to own real estate to make passive income from this asset class. You just have to sacrifice some of your space and comfort to receive payment. You’ll have to share.
My wife and I have three homes. We rent out both master suites for our primary residence and pay the majority of our mortgage with this income. As an intermediate investor, you’ll need to understand the concept of an infinite return. This may be the most powerful concept in the world of investing.
Intermediate Cryptocurrencies. I know you are becoming a great investor and building passive income, but I would still stay on the centralized exchanges at this point in your career.
Why Do I Need to Invest in the Stock Market?
You already have your coins producing interest for you so that you can venture out into the world of capital gains. I would allocate 10% (or less) of my crypto budget to smaller coins on centralized exchanges like Coinbase and Voyager.
I have an entire series on getting started in more advanced crypto topics called The CryptoCurrency 101 series (101, 102, 103, 104, 105, 106, 107, 108, 109, 110). It is still too early to dive into the world of decentralized finance (DeFi).
Intermediate Business (Royalties). Now, we are opening an entirely new form of passive income called royalties. Royalties are income from your creative works. We want to keep our income from royalties as simple as possible for now.
There are many ways to earn royalties, but the best are writing books and blogs, creating videos and other content, music, and finally selling your creativity via T-shirts, photos, and printables.
The best thing about royalties is that they are free or low-cost to create. The worst thing about royalties is that it takes time for you to build traction in any community. Royalties are the long road, so you may as well get started now. Trust me; I am building my royalties as we speak.
Basics of Design 106: Typefaces and Colors
Intermediate Business (Automated Business). The other form of business income comes from automated businesses. An automated business means that you have removed yourself from the act of making money from the company.
You can remove yourself by automation, out-sourcing, or management. For example, if you have a lemonade stand, you can hire (out-source) someone to sit in the stand for you. Or, you can hire someone to run the entire stand for you (management) and share in the profits.
Management will cost you more; however, you will have more freedom of time to build more businesses. At this point, we don’t want to create an automated business that is too big or complex.
I would recommend starting small with an ATM or vending machine business, a small rental car business, or a beneficial insect harvesting business. These are small, and you can run them from your house. My free book “Retire Rich, Retire Comfortable with a Business 2” covers royalties and automated businesses.
The Magic of Passive Income
Remember, it’s not how much money you make from your business that is important. You can always ramp up your business to increase revenue. The important part is learning the ins and out of your business. You can keep it as passive as possible, but you can ramp up as required. Building many income streams is a great way to build financial security on your way to financial freedom.
Conclusion. Don’t get into anything you don’t understand. It’s a warzone out there, and many people will take your money for bad investing, crypto, real estate, and business advice. Read, read, and read some more.
You should be reading and studying for at least two hours a day. Also, you should be working on your passive income sources for another 2-3 hours a day. Yes, that’s 4-5 hours of the day. It’s called the Passive Income Grind for a reason.
If you want an all-in-one guide to passive income, you can read my massive book, “The Biggest Book on Passive Income Ever! (Amazon)” It has 312 chapters and 1,200 pages of financial mindset, retirement planning, investing, cryptocurrencies, real estate, and business. It’s a great place to start. I also have read 69 books and wrote my five takeaways from each. So you can follow my path if you’d like.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article. All Right Reserved Military Family Investing
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