Living on passive income seems like a dream life, but in reality, getting started is anything but passive. Building an income stream takes a lot of active time, effort, and work.
This is part four of my Dividends vs. Royalties series (Part #1, Part #2, Part #3), where I compare passive income from dividend investing to content creation.
Achieving a goal. I finally reached $200 of book royalties on Amazon after almost two years on the platform. It may not seem like much, but let’s look at the facts.
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The average self-publisher makes less than $100 per month on Amazon. Therefore, reaching $200 per month is an enormous milestone for me.
My overall goal is to reach $1,000 per month in book royalties. It will probably take me another three years to achieve this milestone.
In the meantime, I want to compare how long it took me to reach $200 in royalties with how long it took me to earn $200 in dividends on my Dividend Debit Card (Cash App).
Reaching $200 in dividends. I started my Cash App brokerage account in July 2020. At the time, it was my fourth brokerage account.
In October 2022, I reached $212 in dividends on my Cash App account for a total of 27 months. I had $33,000 invested in this account in October 2022.
Reaching $200 in royalties. I published my first book in January 2021. I reached $211 in book sales in October 2023.
It took me 32 months to reach this level of income on Amazon. Keep in mind that my books earn additional money on other platforms.
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Getting to your desired outcome. So, is it easier to invest $33,000 or write 1,024 books? That all lies in the eye of the beholder (you).
If you have a high income, investing $33,000 over two years should be fairly easy. If you are creative, you can write, record, draw, or talk your way to tons of royalties.
What outcome do you want from your passive income? Dividends give you more freedom but at a much lower return.
I am an income investor at heart; I love earning 10% a year in dividends—however, the returns from writing are 100 times higher than dividend investing.
Bond Investing in Your 30s
You see, I can create something from my mind that then produces income. It costs me nothing (except some web subscriptions) to write and publish a book.
I write one book, and it can continue to sell for years or even decades. I do the work once, and it keeps producing profits.
On the other hand, I can write a book, and it may not sell anything. The Paleto rule is in full effect. This rule states that 20% of your work will account for 80% of your profits. I see it happening every day in my book sales.
The 4% Rule vs. Dividends
Easier on the soul. Which method, creating content or dividend investing, is easier on your soul? Again, that depends on your temperament, age, and perspective.
Some people hate the idea of losing money. If their stock, say Altria (MO), has a bad month or year, they feel depressed, sad, or emotional. I look at it as a buying opportunity.
If you are older, you don’t want to start a YouTube channel to build an income stream. It’s more likely you would like to invest in dividends to supplement your retirement.
If you are younger, it’s a great time to create videos, movies, books, and artwork that will last a lifetime. You can use the royalties to invest in dividends.
Bond Investing in Your 20s
Using both techniques in tandem. The wise thing to do is create as many income streams as possible. This will allow you to diversify your passive income to prevent downturns and catch pockets of momentum.
In total, I earn $1,500 a month in dividends across my various portfolios. I make even more than that by trading options every month.
So why do I continue to write when it pays so little in comparison? First, writing will have a massive payday in the end.
Second, I can create additional income outside of Amazon book sales. I can publish on other platforms, write blog posts, and join Medium (the writing platform).
Create Content Daily 2
Finally, I like to diversify myself between capital markets. Some capital markets are stocks, bonds, options, commodities, real estate, and cryptocurrencies.
As you can see, book royalties sit firmly on the outside of these markets, which means it is uncorrelated.
I don’t want all my passive income coming from the stock market, options, or real estate. At any given moment, one or two of these markets can go into a recession.
Currently, stocks, bonds, and cryptocurrencies are having a tough time. Real estate is still doing well, and people are still buying books.
Financial Independence Through Real Estate 4
That’s the primary reason I value having my books on Amazon. I keep writing because it makes me a better person.
Re-learning to be creative. We are all creative; we just need to remember that. We must relearn how to be creative and let our imagination run wild.
There is a joy in being creative that you don’t get from receiving dividends. Don’t get me wrong, I love waking up to $300 to $500 in dividends.
However, it is an even better feeling to hit “publish” on a book you created. It is an incredible feeling to see someone buy your book.
The Bear Market is Your Friend
Therefore, I write for more than money. However, making my work available to the public makes it better. Anyone can write a book for their own ego.
However, it takes a certain proficiency to “write to market” while keeping your integrity. How do you write something that sells but remains true to yourself?”
Finding our voice is perhaps the best thing we can do as a society. Think about the intangibles you will gain before creating content, then create.
Bond Buying is Back, Baby!
Conclusion. Which should you choose first, dividends or royalties? I chose dividends because I had a high income at that time.
It was easy for me to reroute thousands of dollars a month to my dividend portfolio. I loved becoming a capitalist.
However, writing books is my true passion. Now that I am retired, I can write to my heart’s content. I believe my book business can out-earn my dividend portfolio one day.
Live Your Best Life with Dividends!
When you create royalties, it’s important to remember you are starting a business. You’ll be privy to tax benefits and perhaps can sell it at a multiple to earnings.
That means if your royalties produce $50,000 a year in earnings, you might sell your business at a 20 times multiple ($1 million). So, there is more at stake than your current income.
The road to building royalties is much more difficult (and rewarding) than dividend investing. However, dividends can help you retire early and give you the time to create. It’s a fantastic life either way. Good Luck!
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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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