I know what you’re thinking; not another COVID-19 post! Right, and wrong. this article, albeit inspired by the dreaded C-word, can also be adopted for usage by anyone with a basic understanding of financial concepts, who kept some money tucked away in a nest-egg, and wants to watch that nest grow.
The inspiration for this post came when I was entering my building, and saw the landlord had put up a post of shame for all those who had missed out on paying their rent for a period of time. Hence, allow me to attempt to shed a brief light on the concept of “passive income”, a term being thrown around all over the internet, as the take-away lessons in the post-COVID-19 era.
Firstly, what is passive income? Simply put, it is a stream of income generated with (a) little effort, besides your regular 9-to-5 paycheck. Some soothsayers say you work for your income, whereas passive income works for you. HOWEVER, before that, it is important to mention that secondly, there is no such thing as risk-free income! COVID-19 taught us that everything is at risk and not to take anything for granted. So, use the following concepts as an introduction to passive income, then do your due diligence and read up more about it before indulging in it.
Stock Market
Everyone and their second cousin are aware of the stock market. NASDAQ, NYSE, NIKKEI, Kuwait SE etc. it is where one buys and sells shares in companies. These shares can make you a profit in three ways; cash dividend – cash amount paid to the owner of the shares after a year, stock dividend – more shares atop your initial purchase of shares and lastly, selling the shares (hopefully for more than what you paid for them).
The stock market is a classic risk-versus-reward trade off, for the annual amount to be worthwhile, you’d need to buy a large number of shares. These shares can fall drastically in price, however you can play the long game and hold on to them until their price appreciates again.
Word-to-the-wise; never invest more than you are willing to lose.
Drop-shipping
We’re constantly bombarded by advertisements for really cool gadgets on social media right? Once you click the link to purchase, you see a price correct? Memorize that price, then search for the rough description of the same product online, specifically on Jack Ma’s “express” website. 6/10 times you will find the same exact product, for a fraction of the cost! That is drop shipping. You (simply) create a website with a catchy ad, a payment gateway and sell a product you do not own or store. Once you make a sale, you plug the buyer’s information into the express website, and they ship to them. You’re only the middle-man. The difference in prices is your profit.
Once enough people catch on to how drop-shipping works it will become a thing of the past. However, until then, several people are making a living off of it. Problems might arise should delays or cancellations occur.
Real Estate
The price of everything falls; the car you just purchased lost a huge chunk of its value the minute its wheels touched the road. One thing that usually appreciates in value though, is real estate. With this strategy, you begin making payments on a property (then taking out a bank loan or mortgage for the rest) and then start renting it out to tenants (becoming a landlord). The goal here is to rent it out for more per month than you are paying for it.
This requires a much larger capital investment than the other two methods, however, the pay-off can be enough for you to lead a life of luxury.
That being said, there is a risk to everything. Do your research, take stock of your assets, see how much you are willing to invest and start seeing how you too can hop aboard the financial independence train. The concept here is that you can continue to work for money, by having second and part-time jobs, however you are limited by the number of hours you can put in.
As a concept, passive income is a sound strategy. As a risk however, it entirely depends on your appetite.
Like the Rubik’s Cube, Ayman Nassar is multi- colored in his interests, from running to organizing races, stand- up comedy and internal audit, plus a little writing on the side. You can find him on YouTube or follow him on Instagram @LordAymz. Photo by BP Miller on Unsplash.
