No Such Thing As Passive Income

by James on September 17, 2013 · 6 comments

fail-passive-incomeHi All,

I wanted to take a minute to weigh in on one of the internet’s biggest obsessions: passive income.

Passive income is the kind of thing bloggers love to write about: money coming your way with little or no effort or risk on your part.  When you read about passive income, you’ll usually get a list with the following kinds of suggestions:

  • Earnings from a business that doesn’t require your direct involvement
  • Royalties from publishing a book or other form of intellectual property
  • Earnings from internet advertising
  • Dividends and interest income from owning securities, such as stocks, bonds, or mutual funds
  • Rent from investment properties

People have devoted entire websites to the topic.  Some of these are sites like: www.passive-income-pursuit.com, www.thepassiveincomearner.com, www.smartpassiveincome.com, www.greatpassiveincomeideas.com, etc. The internet is full of them.

The major issue with all of these is there is no such thing as a free lunch. All investments require either labor or capital.  Most require a combination of both to be successful.  Let’s say for example that you own investment properties. Well, most of the time you should get passive income in the form of a rent check, but the maintenance of the investment requires effort (you need to do market research and show & maintain your places – or pay someone to do it).  Even stocks require time and effort.  For example, if you are into stock mutual funds, you need to research the fund, and monitor its performance quarterly to be sure management doesn’t take a turn for the worse.  To thoroughly evaluate the fund you’ll have to do due diligence

So, the point bears repeating, there isn’t really any such thing as truly passive income.   Only choices which require varying levels of capital or labor.

Thanks,

James

 

 



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