Passive income investments sound like a dream, which will not be able to come true. But I think it works, if you are able to cope with the circumstances of it. Usually investing comes along with the intention of flashing red and green candlesticks on live-charts for 24 hours a day.
Today I watched a video on Youtube. It was a conversation between Kolja, who is well known in the german P2P lending scene. He talked with Dr. Dr. Rainer Zittelmann, who is especially known because of his books and also of his lifestyle. I like both of them and the combination is just great.
So, they talked about a study held in Germany some years ago. This one asked 276 millionaires about the reason, why they became wealthy. Just one out of those 276 millionaires became rich with shares and stocks. Most of the rest became weatlhy through entrepreneurship like the families of PORSCHE, LIDL, BMW and a lot more.
Passive income investments to safe your time
Just imagine you are at the beginning of your investment-carrer. You would like establish an passive income, just like I want to built a income stream.
What time will it cost you to earn for exampe 1.000 Euro with shares?
Either you invest a hell lot of time into reading statements and trends, to find out the right company you invest in. Or you take very high risks for your money and invest into stocks, where do not really know, what you are doing.
Does this sound okay? Is it the right chance-risk-relation?
I do not think so. Especially at the beginning I tried to find passive income investments, where I can focus on making more money (for investing it) with my skills. It seems to be a better investment to increase my skills, than to read statements and adhoc-messages.
This is why I found out about passive income investments and therewith P2P lending. But as you know I do not invest 100% of my money into P2P lending. It is just aroun 20-30%, mainly depending on where the stocks are at the moment.
What is passive investing?
As I mentioned before one hour of work will bring me more income, than one hour of research for the next investent. For me investing money is very interesting. And I am often distracted from my portfolio, as I want to always know how things are currently running.
Therefore I need passive income strategies, which are working without my time. I mean, this sounds really passively and is exactly, what I am looking for.
Passive investing is the possibility to invest your money into assets, without using (or needing) your time at all. In a perfect strategy your money automatically flows into those investments. And there it will be invested automatically into your asset.
To be able to practice passive investing, it does not need that much, as it maybe sounds like. You just need an idea for passive income strategy and the possibility to automate those processes. And this is what I meant with “circumstances” in the beginning.
What do you need for passive income strategies?
I guess there are a lot of possibilties. In the end I decided for one for myself without knowing all the others in detail. At first I stick to the rule to invest into shares with the percentage 100 – age. I am nearly 40, so I decided to take
- 60% for shares and REITs
- Another 20% should be my crisis fund
- and the rest of 20% into P2P lending.
Does this sound complicated?
When investing into shares, those are strictly companies who pay a dividend. I do not care whether it is every month or annualy. For me it is just important, that they pay a dividend and making me participating on their company win.
Those 60% of shares are divided into several econimical areas like wholesale, industry, real estate and a lot more. As I do not want to read statement and make a lot of research about the companies I decided to follow someone with a system, which is offering signals and advices.
Passive income strategy for shares and stocks
Still, I earn a lot more money with my skills, than with researching for the best investment with my money. I found Alex german blog and read a lot of his blogposts. His Dividend Alarm was exactly, what I was searching for. It is not one of the “Get-rich-soon”-systems, also it is offering several signals.
The Dividend Alarm is more a system of stocks with a dividend income. Additionally the Dividend Alarm monitors around 400 stocks providing several signals. Those signals are in correlation to several additional influences like Gold, the situation at the whole stock market in Europe and the US as well as several stand-alone indices.
You of course have to make the trades on your own, but you can follow those signals. As I am following the Dividend Alarm since nearby one year now, I am convinced, that it saves me a lot of time. And additionally it takes care of my passive income an increases this income stream steadily.
REITs – real estate and property to increase my interest income
Real Estate Investment Trusts are companies, who are regulated by law. Especially in the US and Canada those companies own several kinds of real estate an property, which is rented out. Investors receive huge parts of the rental income from real estate objects.
Over the years REITs are less volantile than shares. This is mainly because of the regulations as they have a strictly high payout-ratio to their investors. In Northern America REITs are used for retirement provision. Also we have a slightly different system european investors are of course allowed to invest their money there.
I began investing into REITs less than a year ago. Here in Germany we have Luis Pazos as an expert on that field. He established a very simple system to make your first REIT investment. Again he is just showing the opportunities, but you as an investor have to invest yourself and at your own risk.
REITs are great for passive income. Depending on the structure of the REIT your investment can easily earn about 7% to 10% of interest. Of course you have to take several indicators into consideration before your investment. For example some REITs have real estate themself and others are mainly financing a property.
P2P lending as a passive interest booster
I guess, I do not have to explain, what P2P lending is. But still there is a lot to think about. Making my first P2P investment some years ago I always selected the loans manually. That took a lot of time – time, I do not have that much today. Therefore I changed to auto-invest-solutions.
Today all of my P2P lending platforms I am invested in, are working automatically with an auto-invest. Since I just check them once a week, I am able to recognize, when the auto-invest is not working. There is always the border of 10% for passive investing, so I usually do not have to adjust it.
How do I organize my passive income investments?
As I already mentioned my goal is to get financially free. This point will be reached, when my passive income will equal my expenses. And that is quite a lot as a family. Therefore I focus on my income producing skills and try to automate investing as much as possible.
Every month I have a saving rate, which is fixed. I started with 10% of my income. Since then I put every increase of my salary on top of it. I just add 50% of it, but this is still a lot. Due to payment raises today my saving rate is nearby 20%.
Additionally I used the so called 33%-rule with my sidebusiness income. 33% are saved for income taxes on a separate account. Another 33% are for investments for my company like books, servers, seminars etc. And the last 33% are for investments in my financial freedom.
With those last 33% I try to grow my income streams from several projects. Those are P2P lending, REITs and of course shares and stocks. Also there is a small part of indexfunds like ETFs, but this just something beside everything else. And I do not calculate it into my assets for freedom.
Working with fixed standing orders
Usually I know, what my fixed salary will be every month. Therefore I know, what my saving rate is. And this is splitted exactly the way I mentioned it before:
- 20% to P2P lending
- 60% to my depot amount and
- 20% to my crisis fund.
My passive income investments are automatically send to my assets. Especially at P2P lending this money is invested completely automatically. As the Dividend Alarm does not recommed to buy a stock every month, the money is mostly send to the account for collecting cash. Until now there were enough possibilities to buy a stock after 2-3 months, so the “loss of doing nothing” is quite small.
Buying REITs is still an adventure for me. I try to lower the buying costs, so I collect a specific sum of cash on my account. As soon as i reache this sum, I invest the money with an order. Of course this is manual work, but I know when I have to order some shares of a REIT and also how much, so it is still a very low timeconsumption therefore.
How much time do I use for my passive income investments per month
I think I would be able to work with around 1-2 hours per month. But there is still some interest for the shares, so I often read about new companies with a signal some more. I would add another half an hour per week for reading and researching, so it sums up to 3-4 hours per month.
And that is it. I do not want to do more as I know I am able to be more productive during that time. As long as I do not invest into one share minimum 10.000 Euro I do not want to use more time for research. And this point is some years away.
Adjust your passive income investments and use your time
My system it adjusted to increase the interest every month. Therefore I earn a little bit more every month through my saving rate and also the small part of the compound interest. I do not really care about my depot amount. I am motivated through my monthly financial statement of my assets.
As you can read in my last report of September my income out of P2P lending interest is somewheren around 40 Euro. Per month!
As I am quite positive when looking into the future I guess this amount will rise constantly. Of course there will be tough times, but looking at the world and the chances she gives us every day, this part of my asset will earn every month.
I do not really know, why investors do not copy this kind of strategy. Yes, I know, I will not make the 14% to 15% in P2P lending constantly. And of course I will not make the 1.000% with a share. But how much do I have to use for this knowdledge?
I decided to use this time wisely and do something more for saving rates. As there is more money for passive income investments, the yield is higher and the income bigger..
Focus on the doubled booster
Honestly, in my eyes this kind of strategy is a booster for your assets. I mean, you do not have to work for money all the time. Just imagine to establish product which will sell itself without your time. Maybe you do some product selling via FBA or publish a book on amazon – this earnings will be passively as well.
Over the next years I will just focus on more earnings from those sources. Maybe they will not be forever, but today I am still earning some money with books I wrote three years ago. Maybe it is just 50 Euro per month, but for three years it is 1.800 Euro in total.
Earnings from products where the work is done are passively. And 33% of those incomes I send to passive income investments, where they are invested in property, real estate, shares on the stock market and of course P2P lending.
Does not it sound like a wealthy loop, whereas your asset increases independing from your time invested?
I hope you are able to understand, why I focus on my interest, earnings and dividends in my financial statement and not on the total amount. Whereas everthing is automated the total amount is not interesting. It is more important, that processes are automated, so your incomestream can grow.
Pay yourself first
If you are still shaking your head and think, I am the biggest idiot on earth, I highly recommend the book “Profit First” from Mike Michalowicz. Of course my system fits best for me and maybe not everyone. The idea behind it is essentially for financial freedom in my eyes.
So I do not want to convince your about my strategy, but to track yourself and automate your passive income investments as much as possibility to focus on incomeproducing activities.
You are the most important person in your life, so deserve to pay yourself first and most of your money. You are supposed to be rich or wealthy with property, real estate, stock market and and entrepreneurship – take your chance and make your financial statement the route to wealth.