Passive Income streams anyone could setup
What is Passive Income?
Well! The basic definition would be earning money through a means where one is not actively involved. To make it further clear most of us know what active income is, where we trade our time for money i.e. work for a company/business etc in a job typically called as 9 to 5 or a 40-hour workweek. In this type of Income, we are actively involved and we are compensated for our time with money.
Passive Income is a way where one need not be actively involved to be earning money. Most of the time it needs a decent amount of upfront work and once the so-called “engine” is set up, one need not be involved actively to generate money out of it. It could be completely passive or might need very minimal effort/time to maintain the system of generating money. Most of you reading this must be aware of this system and I could go ahead and give countless examples. Think of any royalty-earning items like Music Videos, Popular/hit songs, Movies, Books, Blogs, etc and I could go on. You see in all of these examples there is an initial effort needed and once it is done, it could be truly timeless. I can’t help but imagine movies of Marvel to be running years and generations and thus Marvel as a franchise earning a load out of it.
I believe it's important to at least know and think about creating some streams and not completely depend on active income because it could help you earn extra cash, grow your wealth, give you a safety net when you lose your job, and possibly give you financial freedom.
I would discuss some of the streams I’ve set up and the current status and anyone could do it as well.
Disclaimer: This is not a recommendation to immediately go ahead and do any of these. Please do your own research and dive into it only after you are convinced. Also, the references/links mentioned would be mostly catering to India. But you could go ahead and find an alternate in your country.
1. Stocks: Capital Growth and Dividends
As per my opinion, this is the best way to go about growing wealth after any of the debt instruments and basics are done as I mentioned in this 101 blog. The general idea is you are buying a piece of business that you trust will do good and give you good returns when it's time for you to cash out(Retirement or Big future expenses). It's very fascinating for me from the time I’ve learned about personal finance stuff that everyone could own a piece of business starting from a very low amount of money and take a pie of the profits they make by being a part of their share price growth or getting dividends.
Now It’s very important to make wise decisions here. Why? Because :
According to the U.S. Bureau of Labor Statistics (BLS), this isn’t necessarily true. Data from the BLS shows that approximately 20% of new businesses fail during the first two years of being open, 45% during the first five years, and 65% during the first 10 years. Only 25% of new businesses make it to 15 years or more.
And how to go about that is to learn about Fundamental Analysis as in what are the parameters that you would look for to invest in that piece of business. It's not as simple as just seeing their Revenue and Profits from their financial statements every quarter. A lot of things need to be looked at. Now, this is the initial time and effort you need to spend on and If you are an investor in long term then you do not need to actively put effort. Research a few companies deeply and regularly put money in them for some years and then cash out when required. You could go about taking SIP in Mutual funds and relieve yourself of that research headache. You can read about why I do not do that here.
Let's talk about the rationale behind going for this option. Me being from India believe in India’s growth story and its journey to being a Developed Nation. There is a lot of ground to cover and we are way behind but I truly believe we have some exciting times ahead in terms of Economy and GDP growth. You can recognize this based on the growth we have seen in the last few years, the rapid advancement in Digitisation, and the opening of startups and businesses. I’ve personally heard about so many upcoming and growing startups and many companies opening their branches and offices here. A lot of businesses are going to be reaping huge profits from this journey. And we need to do that research and analysis if we want to invest in such businesses. When asked to a lot of big investors, “What is the best investment period you have seen in your lifetime”, they are more excited about what's ahead for the next 20 years in India, than what they have seen in the past.
Now let's talk about the setup I have and what is the current status. I am heavily invested in stocks and there are 3 ways I am taking advantage of this setup with minimal effort.
Capital Growth
I have taken some time to research the stocks and have invested heavily in stocks and I don’t plan to cash out any time soon, Not at least for the next 10–15 years. I majorly invest in Blue Chip companies or companies with Moats (the company’s competitive advantage). It's been 3 years and I am sitting on a handsome 45% profit on my holdings right now. The fascinating part is I didn’t have to do any work for this 45% capital growth, Just some research and then investing my money. A majority of it is because of the recent bull run we saw after the pandemic. I would say I was lucky to be in at right time. Also, this percentage of profits is not very sustainable in long term, But I am at least expecting a CAGR of 15–20% which is also a very decent amount in long term.
Swing Trade
Now in last year, I tried my hands on this one as well, But I followed some rules and it worked pretty well for me. Basically, I swing traded the same Blue Chip stocks which I invest in the long term but only when I feel there is an opportunity there, like if the stock price has gone down a lot but fundamentally there is nothing wrong with the business. I have set up alerts in the Webull app whenever the prices hit the buying or selling levels and forget about it unless there is a notification from the app. That is when I go ahead and log in to my brokerages and make those transactions. Zerodha even gives an option to set up those events as well which is a feature called GTT. All you need to do is keep money in your wallet and when the price comes to that level the transaction is done automatically. I extensively use this on my long-term brokerage account. So generally what I do is I invest some amount of money whenever I buy for the long term and at the same time place another trade in another brokerage account for the short term targeting 5–10% growth in the stock Price value and since these are Blue-chip stocks, I don't mind holding them longer unless the desired target is achieved. Sometimes I get the target of 10% within 2–3 weeks and sometimes it takes around 4 to 6 months, which is way better than a meager 4% on FD in a year. This strategy worked out pretty well for me as you can see from the screenshot below. I made a decent profit of around 72K INR in ~1 year.
Dividends
I feel this is the best and truly passive part of owning stocks. The businesses make a profit and sometimes they don’t know how to reinvest that money into the business to grow it so they decide to distribute some of it to the shareholders. Companies do this quarterly, half-yearly, annually, or sometimes it is random as well. But the amazing part is if you have a decent-size portfolio of stocks, chances are you’d be receiving random cash deposits here and there due to these dividends which can grow and snowball over the years. Another good part is, companies generally pay dividends without bothering about market conditions so you wouldn't feel too bad about price fluctuations because you are getting paid some amounts regularly.
Attaching a screenshot of my current status here to show you how it could grow and snowball. I have received ~14K INR for free in the last ~2 years just for holding the stocks apart from the 45% gain I’m sitting on. I expect this to grow in the next 10–15 years where I want to see my stock portfolio earning at least 1L / year from Dividends only.
US holdings
This is something that I have started just recently where I have started accumulating stocks that are listed in the US stock market. Reason: I see a lot of potential in the tech stocks like Google, Apple, Nvidia, etc, and some other Blue chip stocks listed there. Also, It helps in the diversification of my assets. Never put all your eggs in one basket. It's a very small portfolio right now and I use Vested platform/ app for this one. Right now am on a 0.74 % loss but It's only been ~2 weeks for this portfolio from the point of writing this blog. Again am hoping to earn capital growth and Dividends while growing this portfolio size.
If you want to get started on any of these. Please follow these links :
Learn about Equity: https://zerodha.com/varsity/
Indian Stock Brokers :
- Zerodha Brokerage Account: I use this for long-term holdings.
- Upstox Brokerage Account: I use this for Swing trading(Would be good to have a separate account if you want to do short-term trades as well.)
US Stock Brokers :
- Vested: My Primary Brokerage for US stocks holdings
- IndMoney : Another awesome platform where you can invest in US stocks. Additionally, this feels like a super app and keeps a track of all your Investments in one place.
2. CryptoCurrency
This is a risky and highly speculative asset space right now, So enter this space only if you are willing to take a risk and do proper research. But there are a few passive setups you could do if you don't want to make any investment of your own money which I will talk about first and then later on I’ll talk about the setups I’ve done in which I have invested some money. Right now It's just about 3% of my overall investment portfolio which lies in Cryptocurrency and I am willing to push this to a max of 10% seeing the major advancement in this space and a lot of applications coming around, countries making it a ledger, Large Investment Funds acquiring some as insurance. If you see a lot of events happening in past years like El Salvador making BTC as legal tender, a lot of currency devaluations due to inflation in countries like Venezuela, Zimbabwe, Sudan, Lebanon, Argentina, etc and even recently with the likes of Turkey, Decentralized finance and Deflationary currencies like Bitcoin do seem like the next step in the evolution of currency system.
Hi.com
Just recently came across this website/app where you could earn free Hi Dollar Tokens at least 1 every day. So that's around 30 Tokens every month which is worth ~15 USD as of this blog writing date. You just have to log in and answer one survey type MCQ to earn that token. That takes like 1–2 mins. We surf social media way more than that.
This platform is currently growing like crazy and because of this and a strong referral rewards system, is gaining traction like anything. You can check out their Roadmap and FAQs before getting in.
If you are someone who has not dived into the crypto world yet. I would say this is the best place to start. Keep collecting these coins, be on the sidelines, and cash out later if the Hi Dollar shoots up. You’ve got nothing to lose. This app/platform is way more than this. It's trying to disrupt the Banking space with Decentralised Finance and the roadmap looks promising.
I’ve started this 2 weeks back and have been collecting coins on my and my family's accounts. It takes a few minutes to signup(Only a mobile number is required for now.) Their referral reward system is also amazing which I am taking advantage of right now. Their website mentions :
Referring to your friends is the easiest way to earn even more hi Dollars! Members who refer their friends get a bonus as well as 50% of all their rewards, plus all downstream referral rewards.
So basically every 1 Hi token they earn you earn 0.5 Hi token. That's freaking amazing! If you want to get in Sign up with this link. Go to the respective platform’s app download page and while signing up, if it asks for a referral nickname enter mine: 6165vwat
Spread your referral across your friends and family and keep collecting coins and enjoy the compounding. If the coin shoots up in value you win. If it gets to 0 you lose nothing since you invested nothing.
Few Gotchas: You cannot withdraw these coins now. It has a lockin period of one year to avoid immediate liquidity and thus kind of protect this asset.
Brave Browser
I have also recently shifted to using the Brave browser. This one is more of a behavioral shift. I have been using Chrome for I don’t know how many years.
Some details of Brave :
Is the Brave Browser safe?
Brave is one of the safest browsers on the market today. It blocks privacy-invasive ads & trackers. It blocks third-party data storage and IP address collection. It protects from browser fingerprinting. It upgrades every webpage possible to secure HTTPS connections. And it does all this by default. It’s also built off the open-source Chromium web core, which powers browsers used by billions of people worldwide. This source code is arguably vetted by more security researchers than any other browser. In short, not only is Brave safe to use, it’s much safer than almost any other browser.
Apart from being safe It also gives out free BAT(Basic Attention token) for viewing/clicking some of their ads(You have control of how many per hour). These ads are not user activity-specific, They are random. Free token while browsing. Yes, please! Again this token is free and does not take any investment of yours. It just requires a behavioral shift so it's kind of passive since we do browse the internet using a different browser so why not Brave and earn rewards that way. It won't be much but it will build over time and who knows what will happen to BAT price. If that shoots up then you win or else you lose nothing.
Crypto Assets
Now Another way to earn passively with Crypto is similar to how it is in Stocks. You invest some money in buying some Cryptocurrency and hold them to get that Capital growth as well as earn interest by lending. This depends on how much you believe in the underlying tech. There are also ways to earn more Crypto on your Crypto holdings. It is by lending out or creating Fixed deposits on it to earn interest. Since I believe in the underlying tech I have invested around 3% of my overall portfolio in BTC, ETH, and SOL. I regularly invest in these 3 and also earn interest on top of these holdings. For BTC and ETH, it's a 30-day deposit with 6.7% and 1% with SOL in terms of APY. I use a platform called Vauld right now. I have used Zebpay and Blockfi to earn Interest in the past but have moved all of my assets to Vauld now because of their amazing UI, app, security, and attractive interest rates not only on deposits but also in savings. Below are some interests earned in Vauld and BlockFi. One thing to note is these returns are not absolute currency based they are in terms of Crypto so if the underlying Crypto price increases so will the interest amount too.
Basically, I have earned 5.6K INR for free not doing anything and just holding on to the underlying Crypto. Apart from that, I am sitting on a handsome return of ~20% of my Crypto holdings.
If you want to get started on investing in Cryptocurrency, I would recommend starting with Vauld: https://vauld.com/register/plb2jh1l2e
Grid Bot Trading
This is a fairly new space where I am experimenting and just started recently as well. I will experiment on this for 1–2 months then I would write extensively about it. There are a lot of Grid Bot trading platforms out there But I am doing this in Binance. There is a very steep learning curve and getting started curve on this one. Needs a lot of initial effort, time, and money but once set up, it's another one of those truly passive setups.
The basic premise is you set up an automatic bot in the platform which takes advantage of the volatility of the cryptocurrencies to take trades. You decide on a range of a crypto pair for this bot to work upon and give the no of grids. It automatically sets up events for buy and sell along those grid lines and makes those transactions when the prices come to those values. There are charges associated with setting up the bots, But if the overall profits exceed the charges, It's a win-win situation. The bots keep running and you don’t need to do anything after it is set up. Maybe check after weeks or months. Depending on the range it has been set up. This strategy depends mostly on the crypto pair trading in a range. You can understand this if you have basic technical analysis knowledge or know how to read charts.
If you want to get started with this. Sign up on Binance here: https://accounts.binance.com/en/register?ref=388555102
Check out Trade -> Strategy Trading Section
To conclude, one should definitely think about setting systems where you don’t need to trade time to earn your money or assets. It could be any system. That will truly set you on the path to financial freedom. I wanted to cover mostly the ones which anyone could go ahead and set up with initial time and effort.
