21, 35, or 48 Types of Passive Income Ideas Exist?
Passive income ideas is a very popular topic for years, especially among young people. And now they are extremely important because of the crisis, soaring unemployment, quarantine, and an uncertain future. The internet is full of articles like “21 great passive income ideas”, “35 really working passive income ideas” or “59 legit passive income ideas”. Although, if we read a few, it turns out that many times these are different variations of the same activity.
For example, there are those suggesting you buy shares through ETFs (exchange-traded funds). Elsewhere, direct stock buying is considered a good idea. Still, others see the acquisition of dividend income stocks as a different concept. In reality, all three are only variations of the same investment branch, the same asset class. Also, you can invest in real estate directly, but and also through REITs, funds or shares of real estate companies. Some see renting out warehouses and renting out housing as separate ideas. Yet each one means the same, buying and renting real estate. With small differences.
Activity and Passivity, Fast Money and Slow Money
The other problem is, not all methods mentioned in these lists are generating passive income. We can call them extra income, a second job or freelancer type, independent work ideas. But they have nothing or few to do with passive earning.
“Making money while you sleep” – say some people about passive income. Others consider passive income “that requires little to no effort to earn and maintain”. (Wikipedia.) But I would say, passive income is an investment. A venture, where the pay (or reward) comes in another period than the work was done. The reward is delayed and also uncertain. So passive income activity is always entrepreneurship.
You are not an employee, not a freelancer, not (or not always) a company owner. But something between the last two. Sort of entrepreneur who invests and takes risks. Passive income is “income that follows its own course” – wrote Daytradingz.com.
Invest Time, Money, or Knowledge in Passive Income Ideas
I have no money. How do I invest in my future passive income – can you ask. Invest one of three things in your business. Time, money, or knowledge. But mostly, some combination of the three. There are more time-intensive and more work-intensive, or knowledge-based businesses.
A good, talented fiction book writer doesn’t need capital, nor special knowledge. Only to work, to write. A scientist, inventor, or artist can make money only selling knowledge, patent, talent, ideas. A blogger, for example, has to write, and needs some knowledge and talent for it. But bloggers need only low capital, for example, to buy a domain and a web hosting service (server). A Youtuber can make it with a simple smartphone and some talent, diligence. But many of them invest in a better digital camera, some lighting equipment, or a good microphone. Or at least a selfie bot.
Trusting the Right Persons
Some people only need money, money, money to make their lifetime passive income. A wealthy aristocrat or heiress doesn’t have to do anything. He can entrust a lot of money to the professionals who invest it. And he can make a living from a small portion of the interests of the capital. But woe to them if they have entrusted the wrong person, and the money is gone. Choosing the right person or organization to trust is an important science for the rich.
Some businesses provide active income if you take part yourself in the operation. But a passive income if you hire other people to do it. For example, operating food and drink vending machines, or laundromats. The machines need attention, maintenance, and if you do the job yourself, you work. But you can outsource this job and stay passive. If you chose the right employees. But you can do the same in any other industry. You can have a passive income from any business and company if you let others do a large part of the tasks.
You can play the role of the business owner. Owner, or capitalists, are forming mostly the long-term strategy of the company. And they chose the adequate top manager.
- There are also discussions if investments, like stocks, bonds are passive income or a completely different category. We consider these as passive income now.
- Some ideas are especially dangerous and can cause a great loss to their owners. Gambling type ideas or high-risk investments, for example.
- In the USA, some passive income types have a special tax rate.
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