What is passive income?
Have you ever heard of the term passive income? It’s a very popular concept that we all hope for. A money-making machine that runs on its own. A machine that doesn’t require our labor. Wouldn’t it be so effortless and stress free? A tree that grows $20 bills would be a dream come true. What if I told you that the saying “money doesn’t grow on trees” is totally wrong? What if I told you there was a way to plant a money tree? Let me introduce to you the concept of investing.
Now imagine you’re in a crossroad between two roads. One route is a journey of constant stress, high risk, and consumption of all your valuable time. Another route is a journey of stress-free, low risk, minimal time commitment, and an extremely likelihood of financial returns. The first route is the life of a day trader. The second? A long-term trader.
The steps to plant a tree...
So you want to be a long-term trader. I want to clarify the concept of the tree growing on a tree and apply it to the process of investing. Investing and planting a tree can be quite similar. A tree requires three main components: soil, water, and sunlight. Investing also requires three main components: research, consistency, and patience. First, you must lay the soil (build a foundation) for the plant to start growing. This begins by researching about the various stock brokerage companies you can select to begin your journey of investing. Then you must research index funds, ETFs, and REITS. Once you’ve gained the necessary knowledge to start, the next step is to remain consistent. Much like how you must regularly water a plant, you must consistently commit a portion of money to investing. Personally, I have dedicated $100-$200 a month to investing in different index funds like the Charles Schwab Index Fund (SWPXX) and Vanguard, and in stable companies that I trust such as Apple. The last step is allowing the money tree to embrace the sunlight and watch it grow. Your money will continue to grow due to compounding interest, and dividends.
Ending remarks
It really doesn’t matter what age you are, but the younger you are the better. As a matter of fact, fidelity has a great program for parents to allow kids to start investing.
Now, I want to clarify that investing isn’t the end all be all. It isn’t the solution to all your problems. It isn’t the key to life, but it is without a doubt the beginning.
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Excellent post!