There is a post that I saw by Jared Seah on passive income that I thought I will share it with readers: What is passive income?
One of the things that I kept hearing again and again in various wealth building conversations is the idea that they channel more and more to stocks and shares or property to get passive income.
Some how or rather people are sold the idea that building wealth is rather easy. There is that magic pill that allows you to get something and reap the benefits without doing much work work.
Jared highlight the best example of someone enjoying dividends by virtue of having a certain surname. That is rare.
Most wealth building vehicle is hard to be truly passive. In all wealth building there tends to be 2 levels of work: the initial upfront effort to build up the competency, and secondly, the recurring maintenance effort, of you doing it again and again.
There are seldom things that are truly passive.
I put up this table above in some of my articles where I articulate properties, ETF investing and traditional savings as more passive. It is hard to sell this table, as there will be the folks that argue to no day no night that they have such a magic pill.
My experience with what i found out is the maintenance effort for properties can be limited to yearly if not the occasional rejuvenation of the property. One would properly be more passive, if you have a portfolio of it, perhaps you will engage a manager and thus it becomes more passive.
A passive stocks and bonds portfolio involves channeling more to the portfolio with a quarterly or annual mechanical rebalance. It is still work, but because you are following a mechanical system, it is more passive compared to the other wealth building vehicles.
Even traditional savings require you to look up better deposits or money market funds to redeploy them.
At the end of the day, I hope I didn’t oversell this in the past as If there is some magic golden goose that you can just buy and don’t do any work..
In the last part of his article, Jared highlights what I think might be a similar observation, that is, “passive income” is very prevalently used to sell courses and it seems most of the time, the main benefit to the course participants is NOT the knowledge to build a system to prospect and identify your own stream of income, but to be part of the mastermind group to lich the good businesses that the folks training them provides.
They trust the picks and they reap the income provided by the picks. Now that is truly passive.