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Have I perverted the term passive income

There is a post that I saw by Jared Seah on passive income that I thought I will share it with readers: What is passive income?

One of the things that I kept hearing again and again in various wealth building conversations is the idea that they channel more and more to stocks and shares or property to get passive income.

Some how or rather people are sold the idea that building wealth is rather easy. There is that magic pill that allows you to get something and reap the benefits without doing much work work.

Jared highlight the best example of someone enjoying dividends by virtue of having a certain surname. That is rare.

Most wealth building vehicle is hard to be truly passive. In all wealth building there tends to be 2 levels of work: the initial upfront effort to build up the competency, and secondly, the recurring maintenance effort, of you doing it again and again.

There are seldom things that are truly passive.

I put up this table above in some of my articles where I articulate properties, ETF investing and traditional savings as more passive. It is hard to sell this table, as there will be the folks that argue to no day no night that they have such a magic pill.

My experience with what i found out is the maintenance effort for properties can be limited to yearly if not the occasional rejuvenation of the property. One would properly be more passive, if you have a portfolio of it, perhaps you will engage a manager and thus it becomes more passive.

A passive stocks and bonds portfolio involves channeling more to the portfolio with a quarterly or annual mechanical rebalance. It is still work, but because you are following a mechanical system, it is more passive compared to the other wealth building vehicles.

Even traditional savings require you to look up better deposits or money market funds to redeploy them.

At the end of the day, I hope I didn’t oversell this in the past as If there is some magic golden goose that you can just buy and don’t do any work..

In the last part of his article, Jared highlights what I think might be a similar observation, that is, “passive income” is very prevalently used to sell courses and it seems most of the time, the main benefit to the course participants is NOT the knowledge to build a system to prospect and identify your own stream of income, but to be part of the mastermind group to lich the good businesses that the folks training them provides.

They trust the picks and they reap the income provided by the picks. Now that is truly passive.


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Friday 1st of August 2014

Hi this is what i think is passive enough but few commoners would be able to attain it. Basically have 2x the equity ETF portfolio size (e.g. STI ETF) where 1x generates enough dividend. To me there is no maintenance required except reinvesting unspent dividends.


Friday 1st of August 2014

hi momo, i thought so too. so this would mean u need to make sure 2.5% yield is good enoguh for you.

Jared Seah

Tuesday 29th of July 2014

Thanks Kyith!

My writing style can be a little flippant and heretical.

You have expressed the irony of "passive" better than I do ;)

By hiring a manager to manage our properties, we have become land-owner, and the manager our shepherd.

First thing as land-owner we must ensure:

1. Our shepherd is not stealing from us,

2. Set KPIs and goals for our shepherd so he does not become too "passive".

3. Keep our shepherd motivated so he will not jump ship and work for other land-owners.

4. And if try everything our shepherd is still a dud, fire this idiot!

5. Look for a new shepherd all over again. Sigh...

Now we know why big land-owners don't mind paying millions to good shepherds. Good help is hard to find!

Passive is not cheap!


Tuesday 29th of July 2014

One thing that irks me abt these shepards u mentioned....not only do we hv to feed them. We hv to feed their wives, kids, expensive holidays and mistresses, etc.


Tuesday 29th of July 2014

Ah shucks. It leads to the same conclusion that it is really hard to be passive. This is the same as creating a businees ,grow it successfully plan a successor or business manager to run it.

At some point we need a proper cut off. I still have many telling me property is passive. The occasional niggles are certainly overestimated they feel

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