Demystifying passive income and dividend investing

Last Updated on May 15, 2024

The term passive income is becoming more and more popular on the internet. The prospect of living without having to work is luring young investors and often has a bad outcome.

Also, if you truly want to become rich you have to be ahead of the curve.

What is passive income?

Passive income is earnings derived from a rental property, limited partnership, or other enterprise in which a person is not actively involved.

In layman’s terms, passive income is making money without doing nothing.

passive income

If you stop to think about it for a moment you realize that that’s a paradox. For one the get a return, one has to do something first.

Building your own eCommerce store for example. You have to actually build it first in order to get the income.

eCommerce and affiliate marketing are among the most popular ideas for passive income and in the majority of the time it ends bad. I’m not saying that it’s not possible. It’s just very hard! I say that in the majority of the time it ends bad because people throw money at “marketing gurus” and income courses but usually those gurus are the only ones profiting from it.

Starting your own website can be difficult especially if you’re not tech savvy. And on top of that new websites tend to take lot of time to start getting traffic from google. If you wan’t to try your hand at blogging or eCommerce i suggest buying a working website on Flippa. It’s faster than starting a website from scratch and you can find great deals there.

Dividend investing

dividend investing

Dividend investing means buying stocks of companies that pay dividends. That’s it! It’s not a bad strategy but it’s not as fast as people think it is. Dividend investing is just a subset of investing and young investors are better off investing in index funds for the long run.

Investing in real estate

Investing in real estate is also a good idea for passive income chasers but usually it requires having already a good portion of money and is risky business. Profitable but risky.

Wrapping it up

Think for yourself. When someone promises you fast riches, quit your day-job, become the next millionaire, or whatever snake oil they are selling, run from it like the plague.

Read also: investing for beginners and 50 business ideas for 2021.