LN – What are they and how to obtain Passive Financial Income?

Earning money without having to do anything, that’s what the vast majority think of passive financial income to be. Someone tells me which stock or crypto asset to invest in, and then when I have earned enough I will sell it and enjoy the income, they can answer you if you ask them to expand on what it is about. The reality is that passive income is far from being what it is believed to be, and that is the reason why a very high percentage of new investors fail to obtain it.. In today’s column we will focus on what passive financial income is and the strategies most used by specialized investors who are successful in these tasks.

Conceptualization of passive income:

No, passive income (IP) is not making money without doing anything. Starting from the basis that money is time, the generation of the IP must have as a counterpart the delivery of time. The fact of the matter is that that time can be “traded” for money in a number of ways. The traditional method used by more than 95% of humanity is to exchange face-to-face work time (the home office also falls into this category) for money. It is the present time the exchange for money when working 8 hours a day 5 or 6 days a week. The drawback of this “barter” is that it has limitations on all sides: if for some reason you cannot exchange that present time for money then income flows are stopped. To generate Financial Passive Income (IPF) it is necessary to exchange time spent for money. That past time is the one that was dedicated at the time to understand the origination, risk and operation of the IPF. The problem is that many mistakenly consider these issues very difficult to understand, and want to skip this step by receiving advice from someone who supposedly already has experience in the matter. And if it can tell you quickly and for free where to put the money, so much the better. But since I know that this column has lively readers eager to learn about these topics, we are going to see Here are some distinctions that will add to the accumulation of that “past time” of research at IPF that will make it possible to obtain a new source of income in their lives.

What are and what assets originate the IPF:

In the first place, we have previously studied from this space that there are 6 sources of income origination, and 4 of them are from IP. IPFs are income obtained from the investment of capital, which does not have to be a huge capital, but can start with the simple surplus that we can generate in a month of work. Now, that investment must be channeled through a certain type of financial asset with certain characteristics, which cannot be just any asset. For an investment to be considered IPC, it must meet the following requirements: _You must know in advance how much and when the cash flows will be charged (interest, dividends, income, etc.) and when the invested capital will be returned. _The capital invested must not vary in value or this variation must be small and bearable. _It must be understood how the capital borrower (s) (debtor) originate the payments with which they will make the partial and final payments of the investment cycle. Having then these distinctions, we can already rule out all types of investment in variable income (shares, bitcoin, etc.) since its future performance is not fixed or known with certainty in advance, but is linked to the economic results of the entity station. We must also rule out, for example, the investment in a bots (automated systems that invest in stocks or crypto assets intraday in the markets, very fashionable at this time) that promises us an income given by our investment, because the origination of these funds will depend of the success or failure of the investment strategies of the bots in the market context of that moment. On the contrary, investment in Fixed Terms, Bonds, Negotiable Obligations, Deferred Payment Checks, Deposits in Cooperatives, Collaborative Finances, Stock Guarantees, Fixed Income Investment Common Funds and Stablecoins placed at a rate they are IPF originating assets.

The Anxiety Problem in IPFs

Why are so few people getting IPF knowing this? The big reason is once again the time, but in this case not the past or the present but the future, since the rates of return are usually significantly lower than those expected in investments in equities, and therefore the latter are more tempting under the gaze of the anxious investor. Of course, the risk / return ratio is something unbreakable in finance: the profitability of investments at rate is lower than those of variable income because the risk that is being run is also much lower. With the shares you know what you invest but never what you are going to have when you want to terminate that investment. However, There is a solution that is not widely taken into account and that can re-enthuse those who discard the IPF generation because they believe that they have little capital and that they will have to wait a lifetime for it to bear fruit: the magic of compound interest, which enables the amount originally invested to grow exponentially if the income generated by the investment in early times is reinvested.

Conclusions and final advice

The correct understanding of the concepts outlined here can result in a significant time saving for IPF seekers, by being able to direct the search towards the appropriate vehicles. Dismissing the promises of quick and easy earnings may be one of the most difficult missions to face, but the important thing here is not to let short-term impulses (earn money NOW!) Undermine your long-term goals (obtain an IPF consistently and scalable). One final tip: the technological innovations produced by the blockchain belonging to the field of Decentralized Finance (DeFi) produce that at present IPF can be obtained in hard currency with no other condition than an amount to be invested (there are no minimums, you can start from 100 dollars per example) the possession of a smartphone and an email account, thanks to the investment through stable currencies (doing it through other types of crypto assets such as Bitcoin or Ethereum does not fall into this category due to its variable income status). Taking advantage of this opportunity to start building your IPF column or diversifying it if you are already generating them appears as a good idea in a global context of unstable interest rates. In later columns we will study another type of IP to be able to add more books to the library. Have an excellent week!

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