What is Passive Income

 

Passive income is a kind of constant income that can be obtained with almost no extra labor, and this income has nothing to do with the performance of the market. Investing that produces passive income differs from growth investing: where the former give you a steady stream of cash, the latter have the opportunity to increase in value over time. Compared with growth investment, passive investment is less affected by external economic factors, such as market fluctuations and instability in the macroeconomic environment. 

There are so many ways to generate passive income that some experts have dubbed it "The Unlimited Source of Potential Income . Now, let us walk you through the different sources of passive income. In the future, as long as you add them to your investment portfolio, there is an opportunity to roll wealth in your sleep.

What types of investments can generate passive income?

You now understand the fundamentals of passive income. You may be asking: what type of passive income should I consider? Passive income is usually generated from less volatile investment products such as dividend stocks, bonds, certificates of deposit bonds, certificates of deposit and life insurance life insurance.

This type of investment is relatively stable, which means that the price is not easy to fluctuate sharply, the source of income they bring is relatively stable, and the future trend is also easier to grasp. Naturally, they can be a more stable part of your investment portfolio, and you don't need to keep track of them all the time.

 

In addition, passive investment products are also more suitable for long-term investment. During the investment period, you don't have to keep an eye on the market trends all the time, seize the opportunity to buy low and sell high, and there is less pressure to manage them. If you are looking for ease and stability on the investment road, and do not want to wake up in the middle of the night worrying about market fluctuations, then passive investment should be more suitable for you.

Why is it better to build passive income as early as possible?

1. Your chance to achieve financial freedom

 The bonuses or dividends that passive investing brings you are a type of passive income. Take an investment product with 15%, 20% or even 25% annual dividend growth  the longer you hold these products, the more profits you will get, and these profits may even support you. Surplus daily expenses. With this funding, you have the opportunity to have financial freedom and even quit your job to do what you want.

2. Grasp the advantages of compound interest.

When it comes to getting interest, you can choose to withdraw it in cash or use the interest to reinvest. If you choose the latter, you can benefit from the compound interest, which is a double benefit.

If you invest again, your return will be based on your latest investment total. So every time you reinvest with the new total amount, you can get more bonuses and dividends to re-appreciate your capital.

Is building passive income risky?

Although passive investment is relatively stable, like all investment products, there is a risk of loss, resulting in your passive income not being ideal.

 There can be many factors that constitute risk, such as a company's stock price being hit by a scandal and plummeting. Macroscopically, global political and social events, or currency fluctuations will affect your investment performance.

 To manage investment risk properly To manage investment risk properly, you should not put all your eggs in one basket. You can try to diversify your investments and diversify your income streams. For example, if you consider subscribing to unit trust funds, you will not only invest in a single stock, but invest in multiple stocks at once. If you spread your investments in this way, even if you lose money on one product, you can still balance the loss with other products.

 Another way to reduce risk is to include a savings insurance plan in your investment portfolio. It's a form of life insurance and a great way to build passive income. Its advantage is that without being affected by market fluctuations, you can obtain guaranteed income even as a short-term investment (together with the principal being recovered in one lump sum), and you don't have to keep abreast of market trends. These plans are usually available in different policy terms so you can choose the one that best suits your needs.