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At first you may only be making a tiny amount of money passively, and you may even want to re-invest that money so it compounds and grows quicker. However, with some time, its potential to create enough passive income that you could quit your job or retire .
In some cases youll need to put in some effort up front, but then it wont require as much effort in the future when youre making the money.
Exactly what qualifies as passive income is up for discussion. Most lists which youll find online will include things such as blogging, writing e-books, or creating your own course. Im not including those ideas in this post because, in my own opinion, all of them require too much effort to be considered as passive.
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Blogging will constantly need on-going work, either by yourself or by other people which youre paying. Selling ebooks or classes will need on-going customer support, plus youll need a consistent traffic source in order to continue to make sales. It's possible and there are people who have been in a position to get it done passively, but they make up a small percentage of individuals who really set out to do it.
Ive been blogging fulltime for 10 years and Ive sold ebooks and courses in the past. Theyre great ways to make money, I simply dont consider them to be more passive, in most cases. .
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Nearly any business can be a source of passive income if youre paying other people to run the business. That is true with both online and traditional businesses. This opens up even more possibilities than what will be listed here.
Now lets have a look at a few of the best ways to produce passive income. A number of these are investments which will require some money to begin with. Others wont require any money to get started. If you dont have the money to invest now, consider starting with the methods that dont need any money, read more and then use that money that you earn to invest. .
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Your very first financial priority should be to develop an emergency fund that will cover all of your living expenses for a few months. But dont put this money would be a checking account or savings account at a local bank which pays you a horrible interest rate. You can open a high yield savings account or money market account with an online bank that will earn a much greater return for you.
My wife and I maintain our emergency fund in a money market account with CIT Bank. At the moment (October 2018) CIT money market accounts are earning 1.85percent APY and CIT savings accounts are earning 1.55% APY. Thats 22x the national average! Opening an account with CIT is quick and simple, and can be done online. .
Some companies consistently pay dividends for their shareholders. As a shareholder, you can re-invest the dividends to purchase more shares of the inventory, or take the dividends in money. Reinvesting will let you own more shares, which leads to more dividends in the future (ideally).
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The companies that consistently pay dividends tend to be large companies with a long track record of success. Because of this, these investments tend to be considered less risky than the stock market in general.
Dividend stocks can be a terrific investment regardless of whether you want to reinvest each the dividends on hold on to the stock for quite a long time, or make use of the income produced throughout the dividends.
For far more detail on the topic read Investing in Dividend Stocks at Investopedia. For a list of these shares, see this collection from Dividend.com and this collection from DividendValueBuilder.com.
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Peer-to-peer lending (or P2P) has become extremely popular in recent decades. Borrowers and lenders can be paired up through a website or marketplace. Instead of going to a bank, the borrower receives a loan by an investor.
In some cases the borrower may not have the ability to be eligible for a loan through a traditional bank. And in many circumstances the debtor gets a better interest rate than they could receive from a bank. As an investor, you can earn a great return as well.