If you don't find a way to make money while you sleep -- What are these?

[shortduck]

Hello,

"If you don't find a way to make money while you sleep, you will work until you die." - Warren Buffett.

I understand what Warren is trying to say here. and some examples are
1. Stocks
2. Rental Property

I wanted to ask if there is an existing blog/thread which highlights all these streams of income?

Thanks
sd

[InvincibleChutzpah]

Passive income has been talked to death. MMM has written extensively about his investment strategy and his rental properties, as have every other FIRE blogger out there.

That being said most "passive" income streams aren't very passive. Even MMM spends a lot of time working on his properties. Real estate and being a landlord are not passive at all unless you hire a management company and a handyman to do the work for you. That eats into your bottom line, obviously. The same is true for being a business owner of any kind. No business runs itself. You can hire the staff to do it, then sit back and take in the money it makes. However, like in real estate, that costs more money than just doing it yourself and do you really trust strangers to manage something as important as your income with no oversight from you?

Index funds is really the only true passive income stream I've seen. Passive income is a neat idea. However, being able to earn money with little to no effort is a dream. It's really not achievable for the most part. Warren Buffet is, obviously, a huge outlier and his advice isn't always replicable to the masses. His wealth isn't all that passive either. He was a successful business owner, CEO, and stock broker. He may have made quite a bit from passive investment, but he has also amassed quite a bit by working hard and, you know, running one of the largest multinational conglomerates in the world.

[AccidentialMustache]

Index funds is really the only true passive income stream I've seen. Passive income is a neat idea. However, being able to earn money with little to no effort is a dream. It's really not achievable for the most part.

Say what? Passive works fine -- I plan to be one of those folks in a few short years (as in, 3 or less at this point). Our passive income has already eclipsed our savings rate, by which I mean our active savings was 1/3 of our net worth gain last year. Yes, last year's market gains were pants on head level, that's why we haven't fired already -- we'd like a bit more safety margin.

[Michael in ABQ]

While many types of income get labeled as "passive" the reality is most of them either require some active involvement up front, or some amount on an ongoing basis.

On the spectrum from passive to active, investing in an index fund and not actively managing it (i.e. trying to constantly buy and sell and pick certain stocks) is probably the most passive. Virtually any type of real estate involves some active management unless you buy something like a piece of commercial real estate with a long term NNN or absolute net lease where the tenant is responsible for everything and you just collect a monthly rent check. Those function similar to bonds but the returns are fairly low.

On the other end of the spectrum you can buy and run a business and earn annual returns of 20-30% or more while having employees and/or a manager do a lot of the day to day work. Anyone who calls that passive income is just lying to themselves though. You may not have much if any involvement day to day but it won't stay like that forever. Eventually the business might start to decline or you'll have to replace that manager that's been handling things or make strategic decisions about the future of the business.

[Loren Ver]

Well, I think you found the blog and the forum attached to it.... so that answers part of your first question.

Are you asking for specific, where do I put my money for stocks?
If so here is a MMM blog post on it:
https://www.mrmoneymustache.com/2011/05/18/how-to-make-money-in-the-stock-market/

If you want lot of tinkering, there is an entire subforum discussing investing called Investor Alley.  That's more stock picky hands on though.  JL Collins has a stock series that is really good about investing.

For real estate, here is a MMM blog post on that, more of an intro:
https://www.mrmoneymustache.com/2011/05/23/get-rich-with-owning-rental-houses/

There is also a subforum on it called real estate and landlording if you are interested.

 Paula Pant for Afford Anything Blog does more real estate.  Just depends on what you are looking for.  But without a specific question, it is hard to give a specific answer.

Much of this information is spread about and delved into and discussed thoroughly.  So finding a here, do this, can be a little daunting.  Especially for two topics (stocks and real estate) that are so BIG!

Loren

[InvincibleChutzpah]

Index funds is really the only true passive income stream I've seen. Passive income is a neat idea. However, being able to earn money with little to no effort is a dream. It's really not achievable for the most part.

Say what? Passive works fine -- I plan to be one of those folks in a few short years (as in, 3 or less at this point). Our passive income has already eclipsed our savings rate, by which I mean our active savings was 1/3 of our net worth gain last year. Yes, last year's market gains were pants on head level, that's why we haven't fired already -- we'd like a bit more safety margin.

Hence why I said that investing in index funds is the only truly passive income. Everything else requires work.

[fuzzy math]

monetize nocturnal creatures?
invest in foreign markets so the market is open when its night time here?

[Metalcat]

Index funds is really the only true passive income stream I've seen. Passive income is a neat idea. However, being able to earn money with little to no effort is a dream. It's really not achievable for the most part.

Say what? Passive works fine -- I plan to be one of those folks in a few short years (as in, 3 or less at this point). Our passive income has already eclipsed our savings rate, by which I mean our active savings was 1/3 of our net worth gain last year. Yes, last year's market gains were pants on head level, that's why we haven't fired already -- we'd like a bit more safety margin.

Hence why I said that investing in index funds is the only truly passive income. Everything else requires work.

How are only index funds passive? If someone mindlessly buys a bunch of Apple because of an article they read online, how are they any less of a passive investor than someone who buys a bunch of VTSAX because of an article they read online?

I don't get how only index funds are "truly passive"? What about owning shares of a company you worked for? What about being a silent partner in a business? What about lending money?

There are many passive options. Some may be higher risk than index funds, but that doesn't make them not passive investments.

[shortduck]

I totally understand that some work is required initially and ongoing basis, but the main point that you really don`t have to be too involved like an 9-5 job.

e.g. an Amway multi level marketing need making initial connections, then it runs on autopilot.

sames goes with rental properties, after some initial work, if there a handyman and rental management company, it pretty much runs on autopilot.

another example that comes to my mind is an app development like kids very simple math questions and adding google ads etc. Once you have it little effort on maintaining it.

[thesis]

The great irony of Warren Buffet's quote is that he is still working, ha!

The thing I don't like about the term "passive income" is that it sounds like something one of those finance bros on youtube would talk about ad nauseum: "It's so easy, man! If you don't do it, too, you're so stupid!"

I've long contended that those who succeed at investment property are those who enjoy the hustle and really know their stuff. Correct me if this general assumption is wrong. But the real trouble is when somebody who doesn't know real estate tries to play that game because somebody told them it was an easy way to make money. This sort of thing is why I hesitate to say any form of investment is purely passive. At the very least, if you're going to be an index investor, you have to understand the pros and cons of index investing.

That's not to say that some forms of investment don't require more effort than others, but it's more like, "Once you've done the research and understand what you're doing, some forms of investment require extremely little oversight."

[CodingHare]

I totally understand that some work is required initially and ongoing basis, but the main point that you really don`t have to be too involved like an 9-5 job.

e.g. an Amway multi level marketing need making initial connections, then it runs on autopilot.

sames goes with rental properties, after some initial work, if there a handyman and rental management company, it pretty much runs on autopilot.

another example that comes to my mind is an app development like kids very simple math questions and adding google ads etc. Once you have it little effort on maintaining it.

In that vein then, you can add writing a book.  Or knitting patterns.

Unfortunately, all of these require non-trivial startup effort or are very risky.  MLM's often leave you holding the bag while the people who got in early rake in the money--there is reason they are ponzi schemes.  Rental is requires capital and good knowledge of your market.  Apps and books rarely make their makers rich, more on the level of beer money for most people.

Which is not to say "don't go after these".  I'd like to write up a book (and publish my knitting patterns), myself.  But I wouldn't count on that income alone being significant.  I personally am staking my early retirement on routing the income from a 9-5 into index funds, which is a reflection of my risk tolerance.

[soulpatchmike]

Index funds is really the only true passive income stream I've seen. Passive income is a neat idea. However, being able to earn money with little to no effort is a dream. It's really not achievable for the most part. Warren Buffet is, obviously, a huge outlier and his advice isn't always replicable to the masses.

There is no equity market play I am aware of from 1999 that could provide $28k income after expenses on a one-time $7725 invested in 22 years with less than 20 hours per year of effort, not to mention the other benefits of appreciation, mortgage paydown and income tax reduction.

My experience being a landlord might be unique but I would say that it has been mostly passive over the past 20+ years.  I originally invested $7725 of my own money for a down payment that has turned into ~$600k of equity over 3 properties in 22years plus rent has paid down mortgage principle by over $200k plus has generated over $100k in cash flow after all expenses plus depreciation and paper losses have provided over 50k of AGI income reduction for personal tax returns.  My hours of involvement have averaged less than 20 hours per year including property research and purchasing/refinancing, with about half of those hours going to 2 renovations I have done and 2 evictions I did years ago.  With one turnover per year my hours of involvement are typically less than 10 hours in a year made up of processing rent checks, year end financial accounting, turnover processing(ad, show, lease, inspections and touch up cleaning), and 2 maintenance calls(most often plumbing related).   I had a period of 3 years where I don't think I set foot in a property, nor hired anyone to set foot in a property, just collected checks making it truly passive.

No investments start fully passive but many types of investments can end up essentially passive. 

Even picking the right index stock takes research and rebalancing your portfolio each year takes some amount of time no matter how small.  Heck, living out a mustachian lifestyle can take more time up front than living a life of totally ignoring your spending.