Professional Documents
Culture Documents
in 2021
littlsesaves.com
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Introduction
Hi my name is Abhi. I am from the southern part of India. Little
Saves is my website chronicling my journey towards my
investment goal of 5-to-5-in-12. I wish to follow this rigorous path
and prove to my self and the world that little saves can give big
returns and that it is possible for one to make crores and achieve
nancial independence without sacri cing sleep, family time and
health.
Abhi
Little Saves
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Topics
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What is Passive
Income –
Definition,
Benefits and
Examples
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What is Passive Income – De nition,
Bene ts and Examples
Since childhood, you must have been taught about working hard and learning every
possible skill for your nancial success and stable future. All these skillsets are supposed
to be put into our regular job which takes almost 8-9 hours/day during the whole contract
period. Through our active job is the pillar of our incomes, there is something else that
every all people do in order to secure and boost their nancial status. That is to earn extra
money by creating a stable source of passive income.
The concept or idea of Passive income has a number of myths such as, it is free, it is
useless, so on and so forth. We are going to discuss every query you might have regarding
passive income in this article.
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What are the benefits of passive income?
Passive income is not just about earning extra money, it is also about thinking long term
and creating a number of income sources that buy you nancial freedom to do what you
want. It has certain perks and bene ts that are important for nancial growth:
1. Over a period of time, you will reach nancial freedom and can quit your regular job if
required.
2. You will always have cash in hand which creates extra security.
3. Do you know how the rich gets richer? By reinvesting. Your portfolio income can be
reinvested to further grow your wealth.
4. It will strengthen your retirement corpus and help you go for early retirement.
5. Additional income and nancial stability gives you emotional happiness and time to do
things you care about.
Now, let us see what makes passive income different from other sources of income.
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Example of passive income
If you are a partner in a business and are working there, the money you earn from it is
standard income.
Instead, if you are a sleeping partner in the business, the money you get from it is passive
cash, as you are not putting in any effort into that business.
And, passive income gives/saves you something more valuable than money which is Time!
Time is the most valuable and proportional asset each individual on this planet has and
how one utilizes it changes the game. For e.g., if you have a passive income stream in a real
estate investment trust, you get the extra time to invest somewhere else.
In the active income, you have to regularly trade your time for money while passive
income is time-independent.
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1. Decide how much you can invest
2. Decide your time frames on when you want to retire, how soon you need the monthly
passive income etc
3. Identify the different investment opportunity available to you in your budget and time
frame
4. Execute and make the investments
5. Be patient and wait for the money to start trickling in
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If you work in a high salaried company or have a good strong business, then you can
choose some of the investment sources that provide a monthly return on your
investment.
On the other hand, if you are studying, working, on a low salary or don’t have a job then,
choose a way where you monetize your skills and abilities to create streams of income.
Here are some passive income strategies you can adopt for your self.
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Here are a few other additional income generating ideas that require less time and more
upfront investment.
Invest in fixed deposits: They provide a stable and low-risk low return investment
option.
Invest in dividend stocks: Investing in the stock market is high risk and high returns.
You can earn dividend (note: in some stocks dividend payouts happen annually and
some stocks don’t pay dividends or have low dividend yield) and also pro t from the
increase in stock price. Dividend stocks are typically stable companies that pay a
dividend periodically without fail and can improve your cash ow.
Invest in mutual funds or ETFs: You can consider investing in mutual fund or ETFs that
would appreciate over a long period of time. While this will not directly give you
recurring income, the money invested will grow over a period of time. This can then be
moved to a xed deposit which can give you the recurring income at that time in the
future.
Loans/P2P lending: Loans are given out to generate interest. Risk varies depending on
the customers and the locations you lend to. P2P lending and Peer-to-peer loans are
becoming very common these days.
Rental income: Investing in real estate can become a cash cow if invested right. Invest
your money in buying a residential property or commercial property. You earn rent and
the value of the property will increase with time.
Also, check out our detailed list of passive income ideas to build your income stream.
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Some passive income myths busted
The lazy way to earn money
This myth about earning money passively is all about what grabs the reader’s attention.
Well by far, you have come to know that it is not at all true.
One is supposed to create a concrete plan along with strong backups, do a lot of research
and experiment, put in a lot of time, money, effort, and energy to create the source of extra
cash ow.
There is nothing lazy about generating money on the side.
Not long-lasting
This completely depends on the effort that one puts in and the smart planning that goes
into designing your income generating strategy. The amount of research done and future
security will decide the life of your passive income source.
Even if there is any sign of collapsing in the future, one should be able to predict that at an
earlier stage. Plan in advance and keep monitoring, doing periodic reviews of your
investment portfolio and income streams.
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Limitations of passive income
Like every other thing in the world, passive income too has a few limitations. It will be a bit
stressful at times, personal time will be compromised, nancial loss may occur in case of
un-calculated investment, etc.
All these obstacles will be there for a period of time and can be managed by balancing the
pressure and being a little bit exible.
Keep your eyes trained on the ultimate goal of achieving Financial Independence. If your
long term plan is to quit, visualize the day you will tell your boss that you Quit!
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How long should passive income give returns for?
It is mostly perpetual in nature and will go on as long as the underlying source is active. Eg:
In rental income, you will keep getting rent from the house as long as the house is in good
condition and occupied.
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How is passive income different from residual income?
Passive income is recurring monthly income. Residual income is the balance of money that
is left over after all other expenses are covered. Passive money you earn can grow, but
residual will only diminish.
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Passive Income
Ideas - 9 Best
ways to earn
extra money in
2021
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Now, let's further dive into some passive income ideas that are going to unlock different
streams of passive incomes for you.
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Rental Incomes
Another very popular passive income stream is renting property. It has been around in
India for the past 2000 years! Now, off late more avenues have opened up for you to make
money out of your property.
The usual. Buy the property, rent it out, sip your lemonade as money pours in.
Keep in mind that, the income generated from investing in real estate can earn better IRR
from several other sources. Nevertheless, there is risk of value of land dropping and
property expenses. Plus rent can vary depending on the location.
For 2021, are you availing Tax bene ts for home loans? If not, you can consider investing in
a property, at a good location, with a reputed builder, and rent it. This way you get a tax
break on the loan principal and interest. HRA bene ts will be available too for your
current house. This needs to be declared and taxes paid on the rent received.
Overall, the house is yours, you get to enjoy it for a larger period. On the minus side, less
privacy and matters of security and safety to be considered.
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Few other incomes from property worth mentioning
Depending on your area or locality, these pay well.
Rent out your rooftop for cafes
Front wall can have a Billboard
How about a telecom tower on your terrace?
Have a huge backyard or garden? Rent it out for tuitions and classes or even events.
Don’t prefer the AirBnB route? Here is an alternate way for monetizing un-utilized
rooms. Rent them out as storage space to friends. We do this in our ancestral house
which we barely use. A couple of rooms have been given to people to simply store their
junk. It is accessed very rarely, people do not invade your privacy.
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Mutual Funds
So far, in the rst half of December, I have investments in Mutual funds that have gone
from +28% and -8% and bounced back to a 12% rate of return.
Depending on your risk appetite choose your allocation of funds (I allocate equally across
High, Mid, and Small caps). It is best to go the SIP (systematic investment plan) way,
where you invest a xed amount each month (kind of like recurring deposits) into select
funds. This way, irrespective of the market being up or down, your investment will average
out.
Stocks
Risky and volatile. Investing in stocks can yield different results depending on how you
approach it.
If you are day trading, swing trading, prepare to lose your money.
This is not for the common passive returns seeker. Algo traders and huge volume traders
will take your money in a jiffy. Instead, choose fundamentally sound businesses.
Companies that grow, are of value and most importantly pay you dividends. These stocks
are a great source of extra money that will hit your account every once in a while and
appreciate as the company grows.
4. Dividend Stocks
Stock dividend is the pro t that is paid to the shareholders in shares instead of cash.
The greatest advantage of a dividend stock is that shareholders are not required to pay
taxes on the value. Investing in a stock dividend is generally considered better than a cash
dividend as it gives the shareholders the choice of keeping their pro t or turning it to cash
whenever they desire to do so.
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5. Side Hustles and Income from Online jobs
This century has seen numerous opportunities for you and me to make money from the
internet. There is some work involved and you need to have some skills. But all of these
are good money earning schemes where working from home is an add-on
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Few other ideas for income from online
There are a few other things you can look at:
Blogging
Social Media Management
Coaching and other services
Tutions and Paper corrections
Blogging
Though it takes time to grow a blog that doesn’t mean it is gone. If you have a knack for
writing, use your creativity and genuine information to write articles and eventually
another revenue stream.
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Tuitions and paper corrections
You can easily pick up a side job of teaching any of your favourite subjects starting from
English to Finance to even any local language. My wife was once correcting English papers
for non-English students online. All she had to do was read through and correct the
grammar, sentence structure, etc. A few hours per week is all that is needed to generate
this income source.
Property Share
This is a recent idea where a bunch of investors lend for the construction of a property or
alternately buy a share in the property. You get your returns on the rental income from the
property or if the property is sold a xed % as interest on your funds. There is also REITS
(Embassy group has one on the stock exchange). In India there is PropertyShare and
further away you have Crowdestate, Bulkestate, and Estateguru
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7. Royalties and revenues
You can put your skills and education to good use and generate multiple recurring incomes
for your retirement.
8. Lending
Peer-to-peer(P2P) lending
This concept has picked up steam over the past few years. It is quite simple, you have
money and are looking for a way to grow your money, someone has a need for your money
and is willing to pay a premium (interest) done by a third-party intermediary. There are a
number of platforms such as Faircent, LenDen, etc, and globally Mintos.
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Crypto lending
Cryptocurrency is one of the most stirring innovations of this era, more and more people
are interested in putting their incomes in this eld.
Cryptocurrency is the digital or virtual alternate of money that is powdered by
blockchains. Crypto lending works by connecting borrowers to lenders via cryptocurrency
platforms. This lending works for people who have cryptocurrency reserves and are not
going to use them soon. Some of the crypto platforms are Block , blockchain, etc.
9. Affiliate Marketing
Af liate marketing is simply promoting another company’s product via an af liate link.
You can do this on your blog, social media page or in groups on Telegram or whatsapp.
When a customer purchases any product via the af liate links, a commission gets added to
your af liate account. The advantage of being an af liate marketer is that you can
promote multiple businesses and products from different companies, unlike traditional
salesperson where they only sell products on a single company.
There is no limit to how much one can earn in af liate marketing. It depends on the niche
and efforts that one puts in. Successful marketers can earn up to six to seven gures per
month. Different platforms can be used to promote such a blog or YouTube. Different
af liate programs include ShareASale, JVzoo, Solvid, or Amazon Af liate programs.
These passive income ideas are all tried and tested. Hence, by investing time, effort and
money in the initial phase, a passive income source can be generated with a huge amount
of return.
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