Reap the benefits of compound interestĪnd speaking of these dividend or interest payouts? You can take these payouts in cash, but if you re-invest it instead, you can start to benefit from compound interest as well - a win-win situation for you. That could give you the financial freedom you need to leave your day job or main source of income and pursue other personal dreams, if that's what you're aspiring to do.Ģ. For instance, if you've identified strong investments with dividends that grow by 15%, 20% or even 25% annually 2, then the passive income generated from you staying the course longer term with these holdings is probably going to be more than sufficient to sustain your living expenses. Passive income can come from investments that pay you dividends and interest you earn from your share holdings. You'll get a shot at achieving financial freedom If you're the sort of person who really values peace of mind and who doesn't want to be kept awake at night worrying about market volatility, investments that generate passive income are likely to be a great fit for you.ġ. They're also more suited for long-term investing, so you don't face as much stress over having to 'time' the market accurately, buying when the price is at its absolute lowest and selling at the top.
This makes them a relatively stable part of your portfolio you don't need to spend as much time monitoring them. Revenue streams and income flow on these types of investments are relatively stable and more predictable as they're less volatile than other investments - they don't go up and down in price as much. Now that you understand the fundamentals of passive investing, the next question you'll likely have is: what passive income ideas are there to explore? Passive income is usually generated from investments that carry lower volatility, such as dividend stocks, bonds / certificates of deposit and life insurance plans.
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