Passive Income Tips

I remember my grandma’s firsthand experience
about the time when she received a massive
retirement bonus from her job, upwards of
a quarter million dollars. And this was back
in 1995, so you recognize that cash was worth
a lot more than it is now. She was thrilled.
And then she became convinced to invest that
money in stocks. So, she did. All of it. Every
single penny was given to a corporation to take a position
in stocks. And guess what? Like a magic trick
from your favorite magician, before you know
it, that money went poof, it disappeared without
a trace. Needless to say, she was devastated.
But the good news is this book will help many
avoid making similar mistakes and hopefully,
this video will too.



Bear markets occur every three to five years.
And when that happens, the market declines
on average about 30% to 40%. During this time,
we panic, pessimism rises, and we begin to
fear that the market won’t ever recover.
But outside of all the doom and gloom, there
are a couple of who see this crash as a time for
us to invest more money at lesser costs. These
brilliant minds know that the crash is one
of the greatest opportunities in our lifetime
to move up the ladder.
You know why?
Because everything goes on sale when the economy
drops. While people and shop owners are caught
by surprise, completely unprepared and then
forced to sell their luxury homes, diamond
jewelry, and Lamborghinis at 50% off, you
and I are capitalizing on these real estate
and stock investments at incredibly low prices.
One of the greatest investors of the last
century said, “the best opportunities come
in times of maximum pessimism.” Tip number
one is “the best time for you to take a position
is during a crash.”
So, I started to realize that the greatest
danger to our financial health isn’t a market
crash; it’s being out of the market. And
since you can’t accurately predict the rise
and falls of the market, one among the foremost fundamental
rules for achieving long-term financial success
is that you get in the market and stay in
it for the long run.
But that begs the question; which stock investment
should you make?
Well, this book recommends a solution that
allows us to make money almost entirely on
autopilot. The solution is for you to buy
and hold on to each stock in an index such
as the S&P 500. This includes companies like
Apple, Google, Amazon, and Facebook, which
(by the way) are the four companies that are
in a race to become the first trillion-dollar
company.
Also, an index fund protects investors against
high transaction costs and taxes due to making
fewer trades. This is a strategy recommended
by Dalio, Swenson, Warren Buffett, and Jack
Bogle. Tip number two is “the safest and
securest investment you can make is on index
funds.”



Now let’s look at a great example from the
book. Imagine that two friends, Joe and Bob,
decide to invest $300 a month. Joe gets started
at age 19, keeps going for eight years, and
then stops adding to the present pot at age 27. In
all, he’s saved a total of $28,800. Joe’s
money then compounds at a rate of 10% a year
(which is roughly the rate of return of the
US stock market over the last century). By
the time he retires at age 65, how much does
he have? The answer is $1,863,287. His small
$28,800 investment has grown to nearly a two-million-dollar
investment.
Let’s look at his friend Bob. Bob gets off
to a slower start and begins investing the
same exact amount ($300 a month) at the age
27. He’s a disciplined guy and keeps on
investing $300 a month until he’s 65 – a
period of 39 years. His money also compounds
at 10% a year. The result? When he retires
at age 65, he’s sitting on a nest egg of
$1,589,733.
So, if we step back for a moment, we can see
that Bob invested a total of $140,000, which
is almost five times more than the $28,800
that Joe invested. Yet Joe has ended up with
an extra $273,554, even though Joe never invested
a dime after the age of 27!
Because Joe started earlier, the compound
interest he earns on his investment brings
way more value to his account. The point of
the story is that compound interest is a force
that can catapult you into a lifetime of total
financial freedom. Tip number three is “you
don’t need a lot of money to be wealthy;
you need time.”
Today’s winners are almost tomorrow’s
losers. Don’t let that be you. One of the
biggest mistake you can make when getting
into financial investments is relying on a
financial broker to manage your portfolio.
First and foremost, they are loyal to their
shareholders and the big money commissions
they make by putting you on expensive actively
managed funds. You might end up with additional
fees and taxes that will destroy your possibility
of generating a passive income stream.
Like the story about my grandma, these companies
are incentivized to create bigger profits
for themselves. This is a zero-sum game that
you don’t want to play. Give your trust
to someone qualified who has your best interest
in mind. Registered Investment Advisors, like
doctors and lawyers, have a fiduciary duty
and a legal obligation to act in your best
interest at all times. Tip number four is
“your financial broker will make you broker.”
The thing is numerous adults my age aren't
investing. According to the book, about 50%
of Millennials distrust the financial markets
and keep a great amount of their savings in
cash. If you want to be certain that you’ll
never lose your money in the financial markets,
then you can keep your savings in cash—but
then you’ll also never stand a chance of
achieving financial freedom through investing.



As Warren Buffet says, “We pay a high price
for certainty.” What he could have added
was that we also pay a high price for fear.
If you live in unwarranted fear, you’ve
lost the game before it even begins. How can
we achieve anything if we’re too scared
to take a risk?
You have to focus on what you can control,
not on what you can’t. When you become unshakeable,
you have unwavering confidence, even amidst
the storm. You are no longer trapped by circumstances
or by fear of the coming market crash. At
the same time, you don’t want to be too
confident. That can lead to making bad decisions
such as relying heavily on one stock (like
Apple) or trying to predict market corrections
and fluctuations. Remain clearheaded and use
logic over emotions. Act on the basis of knowledge.
Tip number 5 is “Don’t invest emotionally
in your financial investments.”
If you know someone who is not a financial
genius and may benefit from any of the five
tips in this blog, then please, share this