Why DIVIDENDS are the BEST PASSIVE INCOME you can get!

hello and welcome back to the dividend experiment on today's video we're going to cover why dividends are absolutely the best form of passive income available to the average person as this is the dividend experiment you're probably expecting me to be a little bias when it comes to dividends and this is true but by the end of this video I'll hopefully convince you that buying dividend paying stocks is the best form of passive income out there right now so what is passive income if you don't know what passive income is you must have been sleeping under a rock for the last few years or at least not very well acquainted with the Instagram entrepreneur niche social circle to have passive income is to essentially get money while you sleep and while while you're not sleeping to most sources of income you need to spend your time in exchange for money maybe you work for an hourly wage or you get paid an annual salary either way you are trading your time for money for the most part this is a terrible way to get your income there's a limit to how many hours you can feasibly spend working in a day you need to sleep eat etc so in order to get more money you need to persuade people than hour of your time is worth more and this isn't always easy the great thing about passive income is that it isn't limited in this way the money will gradually keep rolling in no matter how long you spend eating or sleeping or working this means that you can spend more of your time and all those fun things that you like doing now the dictionary definition of passive means without active response and it's this definition now using the passive income sources I'll talk about in this video now you know what passive income is and realize why it's so great you probably want to know how to get some of it I'm going to go through a list of the more common ways people get passive income and why they aren't so good and eventually I'll come to the gold standard of passive income dividend paying stocks so number one bank interest this is one I'm sure you're already familiar with the interest you get from banks it's pretty simple you let the bank look after your money and they give you some money back every now and again in exchange for the privilege of hanging on to it for you it's easy to set up easy to get your money as as investments go is pretty safe too the only problem is it sucks about the present time and that's January 2019 in case anyone is watching this in the future banks pay out a measly interest rate 2% is the highest I can see right now without having to jump through a layer of loopholes at 2% you are actually losing money to inflation so it's best to look elsewhere if you want real passive income number 2 real estate or buy-to-let housing you may have heard that 90% of the world's millionaires have been made through real estate and you may have thought that's the ideal way to make some passive income I won't disagree that real estate buying houses to rent out is a great way to build wealth as the evidence shows it really is however it's hard to argue that is true passive income first you have to buy the house you can't just buy any old house and make some money you have to make sure you're getting some good value when you buy then you can renovate the house to add value to the future renters or just rent it as it is but the real reason this becomes further away from passive income is the tenants you have to be extremely lucky to get tenants where they look after the house themselves and don't call you up asking to fix this or change that of course you can hire a property management company but this will cut into your yield making the investments returns a little bit lower another reason this passive income source is not so ideal is that you need a high upfront deposit to even get involved in this form of passive income this rules out for many would be passive investors number three affiliate marketing dropshipping fulfillment by Amazon although I know these aren't all the same I love them together here as they are accounted by the same argument anyone who is good at any of these and sets of a business that eventually runs on autopilot has spent a long time learning and improving their techniques it's not really passive in the same sense as a lot of work has gone into it although when people try to sell courses or books they'll tell you it's super easy of course in my opinion you can only be successful at any of these if it's your main job rather than being a so-called side hustle as only then you have the real time required maybe someone watching can prove me wrong however with this in mind I would consider them all as being closer to a career change rather than a source of truly passive income as in you can keep your main job and still do something like this very successfully so for that reason in my opinion it's not a very good source of passive income okay moving on to number four intellectual property this includes photographs pieces of music books software logos and other similar things you just have to create something once and then every time someone wants to use the thing you made then they'll give you some money it's actually a really great way to get a source of passive income true passive income however there is a small caveat you actually need to be talented at something to be able to create this intellectual property if you aren't talented at singing or playing any instruments then you probably aren't going to be able to create a piece of music that people actually want to buy so although it's a great way to earn passive income it's not very accessible to the average person number five peer-to-peer lending I had a small foray into peer to peer lending before starting this channel as I was attracted by the premise and the high yields on offer these are some reasonable upsides however I feel the yield is similar to higher yielding dividend stocks such as those we talked about on the dividend experiment but without the capital gain potential upside the downsize from peer to peer lending is that you need a reasonable amount of money to invest and that's to fully diversify yourself and reduce the risk of your loans defaulting the fewer loans you give out the more likely that a large percentage of your money will be defaulted on this means that you lose a chunk of your investment which obviously isn't good peer-to-peer lending is an option but dividend paying stocks are preferential as they have a higher upside and are a more trusted source of income number six a trust fund from your parents okay so this is the best source of passive income I'll admit that but it's not a very realistic option for the majority of people it's only relevant to some very fortunate people so we can't really claim it's the best form of passive income for the average person there's also the whole it's not as a fulfilling if you don't work for it stick I don't want to go into any of that right now so let's move on to our final passive income source number seven dividend paying stocks we have reached the holy grail of passive income dividends once you've researched your company and chosen the stock you want to buy there isn't much more you need to do you can just sit back and let the income roll in on top of this there's also the chance of capital upside so when you do eventually sell you can make money from that too of course you can argue that you should be keeping on top of news and making sure the company is still a good investment and it isn't going to be faced with a choice of cutting its dividend or not doing this kind of research would obviously invalidate its passive quality however the fact of the matter is that you don't need to in order to get your payments in fact you don't even need to do much research if you just by market index fund and put your money into the market as a whole or pick a dividend fund and you can just sit back and let someone else take care of your passive income another positive about dividend investing is it doesn't matter what your skill set is you can still use it as a passive income source as it's just your money earning money rather than your time or skill it doesn't actually matter what job you do you can still get rich from dividend investing a lawyer a doctor and a teacher can all buy shares in the same company and get paid the same dividend getting started in dividend investing is also super easy and requires a far smaller initial investment than real estate investing or buying a buy to let so with the generous yields that a lot of high quality companies are offering at the moment as well as being one of the most accessible options on the list it's no wonder that dividend investing comes out on top I myself I'm obviously very interested in doing and investing and the goal of the dividend experiment is to create a big enough dividend portfolio to become financially independent if you want to know how my dividend experiment is going then feel free to subscribe I'll buy a new dividend paying stock every month and more videos like this in-between if you think I missed anything or got anything wrong then let me know in the comments if you think dividends are the best passive income - then give this video a like thanks for watching and I hope to see you on the next video see ya [Music]

Channel: The Dividend Experiment

Views: 4,661

Keywords: entrepreneur, dividend investing 2019, dividend investing, passive income, best passive income 2019, best passive income, best passive income ideas, passive income 2019, passive income investments, passive income guru, how to make 100 per day, passive income real estate, how to invest, business, dividend paying stocks, intellectual property, fulfilled by amazon, dropshipping 2019, dropshipping, affiliate marketing, passive income explained, how to make passive income, dividend

Id: cGjp8Kxneuo

Length: 9min 52sec (592 seconds)

Published: Sun Jan 13 2019