What is Passive Income?

passive incomeWhat is Passive Income?

Have you ever heard of passive income? We would all like to work less and still make money. It sounds like a pipe dream or, at best, something that only other people can achieve. Well, the idea is not as far-fetched as you think. It could happen to you and your business.

Passive income is doing the least amount of work and still reaping a profit beyond the initial time and financial commitment. Something that you have to do over and over to earn money is a job. Everyone knows how the work operates. If you don’t go to work, you don’t get paid.

It involves a type of business venture that will continue to make money without you doing very much if anything. The most popular type of passive income is real estate. Real estate ventures can turn a profit from either the immediate resale or through rental property. It may take people a while to build up to this type of passive income because of the initial cost.

It can come in small packages as well. Stocks and dividends fall into the passive income category. Money is deducted from your business and put into these types of funds in the hope of long-term gains. After the money has been deposited, the only other responsibility that you have is to monitor your investment. With a good broker, they can even take care of that task under your supervision. Continue reading “What is Passive Income?”

How Do I Earn Passive Income?

earn passive income

How Do I Earn Passive Income?

Passive income is money that we earn from projects we’ve set up in the past. Something we have set in motion is still making us some money. There are many ways to earn passive income. Here are a few ways that a person can earn passive income.

* Use your website.

If you don’t have one, here are some reasons why you need one. A website is more than just a business beacon for whatever your products may be. While you are working hard to make money, let the website do some work.

Sign up for affiliate programs. Businesses with compatible products for sale, but not in direct competition, partner with other websites to get more traffic. Once the ads are placed, all that is required is to wait for the traffic.

One useful program is Google AdWords. The ads placed on your website will be compatible with the theme of your website. When people click on these ads you make money. If they actually take advantage of the offer, you stand to make even more.

* Discover your talents and skills.

They will lead to the ideas that can make you some money. Writing a book is a form of passive income. After the book is published, the revenue that comes is because of initial marketing of the book by yourself and the publisher. A popular book will have paperback rights and possibly movie rights.

* Invest in stocks and bonds.

With the unpredictability of the stock market, look for long-term investments. Over time stocks will drop, but they will also recover and can turn into a tidy sum over ten or more years.

As a self-employed individual, don’t neglect your own retirement fund. Stock dividends or other IRA so that you are earning money for a more secure future. After the fund is set up and the stocks, bonds, and mutual funds are chosen for investment, nothing else is left to do except to monitor the account.

* Write content.

Everyone wants good information and the Internet is often the first place that they look. Good content also needs a way for people to find it. Joining sites like Associated Content and others that pay for page views is considered passive income. Associated Content will offer upfront payments, but they have also instituted a performance payment that is based on the number of page views the articles receive.

To get your content noticed research popular keywords and use them in appropriate densities throughout the articles. Promote the content on your site and through friends and family. Now, wait for the traffic to do the rest. This content can make money for years to come if the topic is one that will stand the test of time.

There are a number of ways to make passive income. Don’t forget real estate when money allows. Check out the Internet for more ideas that can help you.

Cash in hand

Cash in hand

Cash in hand

Currently, stock markets are in a bull phase and new people are entering stock markets daily. However, I am a regular profit Booker in these markets. I am investing in cash, not trying to time the market tops and bottoms. I have my own way of trading as everyone has his unique trading method. My cash in hand position rise when markets are above Nifty PE 24 levels and I keep buying stocks when Nifty PE is below 19. This way I get value stocks at a bargain.

When you are in a bear market the old saying is, “He who loses the least is a winner”. No, you can’t live on that small a return, but you can lose large sums by trying to be invested at all times. There have been many years in the past where cash in hand with no percent return beat the heck out of the stock market.

Example:

Go back to 2000 and remember the NASDAQ lost 78% of its value in 3 years. Since March 2000 investors in the 50 hottest-selling mutual funds have lost an average of 42% according to the Lipper Analyst. Fidelity Magellan, the largest fund at that time remains a loser of 23% and Janus, 4th largest, is down 45%. The Buy N Holders have still not recovered their investments.

Why buy and hold is not a good strategy when the market is overbought because when markets go down. It does not care about fundamentals of a particular stock. Horses and donkeys are treated the same way.
If you had sold out near (I did not say at) the top, say within about 10 or 15% your account would have been pretty darn healthy when it finally did start back up. You would not have lost 30 to 40% or more of your hard-earned money. That is what I refer to as a “reverse profit”.

If you had put a loss limit on your portfolio of 10% on each position and taken out just enough to live on it probably would that have been less than letting it stay invested in the market? You can easily check that.

What Smart investors do?

Putting 100% of your money in a money market while the market is declining does not mean you are not invested. You are invested – in cash. This protects your savings from huge losses that can and do occur regularly in market cycles.

The smartest investors set a limit from where they bought from the highest price their equity has reached as to where they will sell if it starts going down. Usually, 10% is the rule of thumb, but it can be 5% or 20%. That is your choice.

All investors must learn that cash in hand is a position or they are sure to lose their money.

Again, This is not an advice, This is my personal way of trading and you need to research yours.

Invest in Mutual fund or direct invest in equity

Mutual fund or direct investShould I invest in Mutual fund or direct invest in equity

A question that kept boggling my mind was whether to buy a mutual fund or direct invest in stocks. Whether direct Investments offer higher returns than primary equity-based mutual funds or not.

I have been a regular mutual fund investor for many years and I am getting around 15% annual return. In fact, my last year Mutual fund return is average 21% (which is incredible).

Two greatest benefits of investing in Mutual funds are

  1. Less risky than investing in equities directly.
  2. Returns in Mutual funds are more consistent than equities because they are generally well diversified over a portfolio of stocks.

However, My stock portfolio return is above 70% over the same length.

Last year return

Last One year cash returns.

Nowadays, we are told that mutual funds are the best way to invest in stock markets in advertisements and articles.

My view

In my opinion, Investing in mutual fund helps the fund house, fund manager & their employees. Mutual funds beating Index are a trifling argument. Those who directly obtain stocks do not by all companies that are in the Index and hold on to them. A fastidiously managed portfolio of two stocks can surpass most mutual funds. The trick is to shop for low, particularly throughout the crash and sell high. Most of the people do the alternative. SIP is another scam to draw in the most salaried category who have no idea what they’re stepping into. The larger the crowd in Mutual funds, The larger the fund earns  You rarely see any real dividend or desire obtaining, and haven’t any say in company affairs like voting rights, don’t perceive what’s occurring within the company.

This, therefore, referred to as Mutual Fund and SIP nostrum helps solely fund houses and brokers with a  regular financial gain. Some sectarian mutual funds give annual returns over 60% too, but still, they do not outperform the relative sectarian indices. I would agree that Mutual funds are the most effective, once the fund goes up 20% when the market goes down by 20%. Otherwise, it’s nothing but simply an option for people who wish to indirectly enter the market.

There is general misconception or fear spread by our media that direct equity investment is risky and SIP is best. I believe Market participants lose cash in equities after they leverage or after they invest in junk stocks or when they trade stocks based on recommendations (including Analysts on TV channels). A carefully managed portfolio of even two stocks can surpass most mutual funds. A decent share of the retail investors loses cash because they bog down in junk stocks as a result of TV channels and their good-for-nothing specialists.

The problem is. After they report news or give recommendation there are really advertising those stocks. If Reliance power or a JP group or a company like KS-Oils is in the news then retail investors get a brand new stock recommendation. And they are never able to exit it before the promoter does.

If you’ve got the time to actively monitor and research stocks, you’ve got a reasonable know-how regarding the stock markets and you’ve got the patience to absorb market volatility.

To prove my point that whether to invest in Mutual fund or direct invest. I am doing an experiment. I will buy Two stocks, ITC and HDFCBANK of 10,000 rupees per month and an Equity diversified mutual fund named HDFC Equity Fund – Direct Plan (G) of the same value per month and let us analyze the returns of both after a period of one year from 10 May 2017.

 

Click to see the comparison Performance Tracker sheet

MF vs Cash

 

 

 

 

A disclaimer: I am not related to any fund house. I am just another regular investor who invests in Mutual funds and direct stocks as well.

Trading Calculators

 Trading Calculator

Trading Calculator 1: To find Support and resistance levels of stocks.

Enter these details:
HIGH: Enter High of the day
LOW: Enter low of the day
CLOSE: Enter the Previous close price of the day. (If using for intraday purpose then Close means Current price)
( Refresh page to find another stock level)
All you need to do is enter your data in Non_Yellow cells only.

Trading Calculator 2: To know how much Quantity to buy for a stock as per your risk tolerance levels of stocks.

for example: for Risk reward ratio 1:2, You enter 2
We prefer and advice to Trade only those stocks where risk reward ratio is greater than 1:3 in delivery
and greater than 1:2 in day trading.
All you need to do is enter your data in Non_Yellow cells only.
If you have any feedback about Trading calculators or want to see any other calculators. Please e-mail me (contact form)