Why an Investment That’s Passive to One Person, May Not Be Passive to Another
Many people are somewhat confused on the idea of passive income, and spend their time trying to find the 100% passive income source. However, even the most passive investment contain some active component. For example, stock market investing is often considered the most passive investment- but you still have to oversee a money manager and watch your stock’s value fall and rise. For some people owning a vending machine business, which is considered one of the least passive businesses, is adequate. These differences in what is passive and what’s not arise because the passivity of income is relative. Not only are some investments more passive than others, but different people may find the same investment to be at different degrees of passivity.
An interesting and unfortunate truth about passive income, that is pretty much universally true, is that the higher the financial barrier to entry the more passive the investment. This is because not only does it cost money or a large initial investment to make the highest returns, but it also takes a lot of money to be able to invest in an asset that takes less maintenance. For example, anyone can get a job. It’s free and easy to acquire, but it is the least passive of the passive income sources. The amount of money you can make is capped by your salary and wage that has been predetermined by your boss or business. On the other hand, it may take a lot of money to invest in the stock market, but it offers the highest returns and least maintenance.
When people have already started to make passive income, and move up the passive income scale, they start to get more and more disinclined to invest in income sources lower on the scale. For example, at what time blogging for passive income may have interested an investor. But if that investor has now been able to quit his job, and his paying his bills through real estate investments, blogging may no longer be passive enough to be worth the effort.
