what to do with money for passive income

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investor456
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what to do with money for passive income

Post by investor456 »

Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)? After a lot of research:

- I have looked into real estate, but the market is high enough now where positive cash flow off purchases dont really seem all the feasible unless you put a huge down payment, and that seems to go against everyone in real estate saying to diversify and buy multiple properties. REIT?

- Could invest in a index fund or dividend funds. Sure, just feel like there is something better out there.

- Buy a owner absentee business (looked into this but i am unsure how much i trust the numbers given by the owners on sites like buybiz or whatever.

Anyway, i tried talking to financial advisors and they basically just want to put my money in the market, so I was looking for a different perspective. Thanks in advance.
muffins14
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Re: what to do with money for passive income

Post by muffins14 »

investor456 wrote: Fri Jun 02, 2023 7:56 am Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)? After a lot of research:

- I have looked into real estate, but the market is high enough now where positive cash flow off purchases dont really seem all the feasible unless you put a huge down payment, and that seems to go against everyone in real estate saying to diversify and buy multiple properties. REIT?

- Could invest in a index fund or dividend funds. Sure, just feel like there is something better out there.

- Buy a owner absentee business (looked into this but i am unsure how much i trust the numbers given by the owners on sites like buybiz or whatever.

Anyway, i tried talking to financial advisors and they basically just want to put my money in the market, so I was looking for a different perspective. Thanks in advance.
If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
Crom laughs at your Four Winds
RJC
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Re: what to do with money for passive income

Post by RJC »

If there is a way I think we would all be doing it. I'm not aware of any other ways to make substantial passive income without introducing outsized risks.
dbr
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Re: what to do with money for passive income

Post by dbr »

Is your actual objective to retire and live out your life spending your wealth, or is there a specific reason you want "passive" income in the sense of thinking that you are holding the principal to perpetuity and somehow pulling out withdrawals along the way without spending down the asset? I'm not sure passive income, which is a financial term, contains by being uttered a plan for retirement.

The most typical case for people here is to retire with a store of wealth which is then to be spent down carefully enough that there is little risk of running out of money while still being alive. Investing in stocks and bonds is well suited for that, especially if one also has some life long income streams such as Social Security, pensions, and annuities to supply part of the income.

If the objective is to preserve the asset and die with the asset undiminished to be handed over to someone else but one can find a way to withdraw income along the way that might look different. You can do it with stocks and bonds but you can't spend as much money. A question about real estate is what is the thought process about what the end point is? Would the idea be, for example, that you live by spending a portion of the rents from real estate holdings and when you die someone else inherits a large holding of real estate. Or, at some point do you sell off assets to support spending.

What are you really thinking about how this works?
Marseille07
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Re: what to do with money for passive income

Post by Marseille07 »

muffins14 wrote: Fri Jun 02, 2023 8:22 am If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
I'm not sure if this is necessarily passive unless your stock dividends & bond coupon payments consistently yield 3.5%~4%. Passive needs some level of "fixed income-ness" to it, and capital gain ain't one of them.
secondopinion
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Re: what to do with money for passive income

Post by secondopinion »

Marseille07 wrote: Sat Jun 03, 2023 10:26 am
muffins14 wrote: Fri Jun 02, 2023 8:22 am If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
I'm not sure if this is necessarily passive unless your stock dividends & bond coupon payments consistently yield 3.5%~4%. Passive needs some level of "fixed income-ness" to it, and capital gain ain't one of them.
Right. There are reasons for dividend funds and long-term corporate bonds. Just be careful not to go too far on the risk scale to do.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
Marseille07
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Re: what to do with money for passive income

Post by Marseille07 »

secondopinion wrote: Sat Jun 03, 2023 10:46 am Right. There are reasons for dividend funds and long-term corporate bonds. Just be careful not to go too far on the risk scale to do.
Yeah, another thing to it is that the div yield would have to be sustainable. Something like SCHD is *probably* OK, although I haven't checked their track record on div yield.
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Re: what to do with money for passive income

Post by White Coat Investor »

investor456 wrote: Fri Jun 02, 2023 7:56 am Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)? After a lot of research:

- I have looked into real estate, but the market is high enough now where positive cash flow off purchases dont really seem all the feasible unless you put a huge down payment, and that seems to go against everyone in real estate saying to diversify and buy multiple properties. REIT?

- Could invest in a index fund or dividend funds. Sure, just feel like there is something better out there.

- Buy a owner absentee business (looked into this but i am unsure how much i trust the numbers given by the owners on sites like buybiz or whatever.

Anyway, i tried talking to financial advisors and they basically just want to put my money in the market, so I was looking for a different perspective. Thanks in advance.
Define passive. You could get 5% by sticking it in Vanguard Federal MMF right now. That's $100K of incredibly passive income.

You could also leverage it up and use it to buy 20 short term rentals you could manage as a full time job. Probably get $400K in "passive income" from doing that.

You've really got to decide how passive you're looking to go. But it's certainly reasonable to invest it into a reasonable portfolio of very passive index and index like mutual funds and plan to spend $80K of it a year indefinitely.
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Re: what to do with money for passive income

Post by muffins14 »

Marseille07 wrote: Sat Jun 03, 2023 10:26 am
muffins14 wrote: Fri Jun 02, 2023 8:22 am If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
I'm not sure if this is necessarily passive unless your stock dividends & bond coupon payments consistently yield 3.5%~4%. Passive needs some level of "fixed income-ness" to it, and capital gain ain't one of them.
I mean if you can’t be bothered to log in and sell shares for money, you’re just too lazy. I’m willing to call something passive income if it involves logging in and clicking a mouse or trackpad or iPhone
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Marseille07
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Re: what to do with money for passive income

Post by Marseille07 »

muffins14 wrote: Sat Jun 03, 2023 11:07 am I mean if you can’t be bothered to log in and sell shares for money, you’re just too lazy. I’m willing to call something passive income if it involves logging in and clicking a mouse or trackpad or iPhone
I think you're misunderstanding passive income. Passive income is a form of *income*, which means you have something that puts money in your pocket.

It has nothing to do with *withdrawing* money.
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Re: what to do with money for passive income

Post by dbr »

There are various definitions of passive income, the only ones being defined with some exactness being the ones used by the IRS. In the IRS case dividends, capital gains, etc. are portfolio income and not passive income.

The advice here is for the discussion to be explicit about what is wanted by the investor rather than falling back on jargon that may or may not mean what was intended.

I have the idea that the OP wants to know if he might get much better results toward his objectives by investing in real estate or a business than by investing in stocks and bonds, presumably with the idea that the income would be the dividends and interest from the holdings.

If it were me I would not risk my retirement store of wealth on real estate or a business. Others might differ and could demonstrate perfectly successful investments in either. It is not as if stock and bond investing is not also risky.

There are ways to convert investment assets to income streams that are less or at least differently risky than stocks and bonds. SPIAs and TIPS ladders are examples. That does not constitute advice to do either.
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Re: what to do with money for passive income

Post by secondopinion »

Marseille07 wrote: Sat Jun 03, 2023 10:52 am
secondopinion wrote: Sat Jun 03, 2023 10:46 am Right. There are reasons for dividend funds and long-term corporate bonds. Just be careful not to go too far on the risk scale to do.
Yeah, another thing to it is that the div yield would have to be sustainable. Something like SCHD is *probably* OK, although I haven't checked their track record on div yield.
I see stocks in different camps with dividends:

- No dividends (all capital gains).
- Low dividend (the dividend is not the focus of the company but it pays one).
- Medium dividend (growth makes the dividend grow quicker than inflation).
- Real-Sustainable high dividend (enough growth to grow the dividend with inflation).
- Nominal-Sustainable high dividend (maintains only the nominal dividend).
- Disintegrating high dividend (pays more than what can be sustained nominally as it will need to be reduced eventually, but not at high risk of complete failure).
- High-risk high dividend (pays far more than can be sustained and there is a high risk of complete failure).

I have dealt with all of these before; I would recommend that investors focus on real-sustainable dividends if dividends are important. Trying to work out the lower rungs of dividend quality is a speculative prospect (not to say money cannot be made, but it is not often by the dividend exactly).
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: what to do with money for passive income

Post by cjcerny »

muffins14 wrote: Fri Jun 02, 2023 8:22 am
investor456 wrote: Fri Jun 02, 2023 7:56 am Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)? After a lot of research:

- I have looked into real estate, but the market is high enough now where positive cash flow off purchases dont really seem all the feasible unless you put a huge down payment, and that seems to go against everyone in real estate saying to diversify and buy multiple properties. REIT?

- Could invest in a index fund or dividend funds. Sure, just feel like there is something better out there.

- Buy a owner absentee business (looked into this but i am unsure how much i trust the numbers given by the owners on sites like buybiz or whatever.

Anyway, i tried talking to financial advisors and they basically just want to put my money in the market, so I was looking for a different perspective. Thanks in advance.
If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
This. Focusing on income with your investments means greatly narrowing your focus, which is exactly what you don’t want to do. Just consider a annual withdrawal of 3.5% to 4% of your stock/bond index funds to be your “income”.
Marseille07
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Re: what to do with money for passive income

Post by Marseille07 »

dbr wrote: Sat Jun 03, 2023 11:20 am There are various definitions of passive income, the only ones being defined with some exactness being the ones used by the IRS. In the IRS case dividends, capital gains, etc. are portfolio income and not passive income.
IRS's definition is odd because they discuss a new notion in "portfolio income." If they put it like that then you can never have passive income from your portfolio.

I like what secondopinion mentioned which was stock ETFs could be in different camps with dividends. Their view is more in-line with what I typically consider passive income.
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Re: what to do with money for passive income

Post by dbr »

cjcerny wrote: Sat Jun 03, 2023 11:30 am
muffins14 wrote: Fri Jun 02, 2023 8:22 am
investor456 wrote: Fri Jun 02, 2023 7:56 am Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)? After a lot of research:

- I have looked into real estate, but the market is high enough now where positive cash flow off purchases dont really seem all the feasible unless you put a huge down payment, and that seems to go against everyone in real estate saying to diversify and buy multiple properties. REIT?

- Could invest in a index fund or dividend funds. Sure, just feel like there is something better out there.

- Buy a owner absentee business (looked into this but i am unsure how much i trust the numbers given by the owners on sites like buybiz or whatever.

Anyway, i tried talking to financial advisors and they basically just want to put my money in the market, so I was looking for a different perspective. Thanks in advance.
If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
This. Focusing on income with your investments means greatly narrowing your focus, which is exactly what you don’t want to do. Just consider a annual withdrawal of 3.5% to 4% of your stock/bond index funds to be your “income”.
Meaning, get rid of the anchoring on the term "passive income." But we do need to know what the OP is actually trying to do.
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Re: what to do with money for passive income

Post by dbr »

Marseille07 wrote: Sat Jun 03, 2023 11:33 am
dbr wrote: Sat Jun 03, 2023 11:20 am There are various definitions of passive income, the only ones being defined with some exactness being the ones used by the IRS. In the IRS case dividends, capital gains, etc. are portfolio income and not passive income.
IRS's definition is odd because they discuss a new notion in "portfolio income." If they put it like that then you can never have passive income from your portfolio.

I like what secondopinion mentioned which was stock ETFs could be in different camps with dividends. Their view is more in-line with what I typically consider passive income.
See my post above.
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Re: what to do with money for passive income

Post by arcticpineapplecorp. »

Marseille07 wrote: Sat Jun 03, 2023 10:26 am
muffins14 wrote: Fri Jun 02, 2023 8:22 am If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
I'm not sure if this is necessarily passive unless your stock dividends & bond coupon payments consistently yield 3.5%~4%. Passive needs some level of "fixed income-ness" to it, and capital gain ain't one of them.
but then what really is "fixed" income but an annuity, pension, social security?

bond yields increase and or decrease (you could buy a 10 year bond that's guaranteed to pay a fixed amount of interest but the payment may be lower when you renew in 10 years, or higher)

real estate may be consistent...until you have a vacancy or have to make repairs (there goes your cash flow back into the business)

lots of ways to get passive income (interest, dividends, annuity income, etc) but the question is does it have to be consistent and/or adjusting upwards with inflation? there's the rub.

i love these posts where someone says i have 2 million to invest and need passive income but never tell you how much they actually need. is the amount realistic or unrealistic? no way of knowing unless we know all the details.
Last edited by arcticpineapplecorp. on Sat Jun 03, 2023 11:37 am, edited 1 time in total.
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Re: what to do with money for passive income

Post by Marseille07 »

dbr wrote: Sat Jun 03, 2023 11:34 am See my post above.
Understanding what passive income means in terms of stocks / bonds portfolio is still important. IRS's definition is lacking because they lump everything as portfolio income.
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Re: what to do with money for passive income

Post by arcticpineapplecorp. »

OP edit your post according to asking portfolio questions otherwise it's garbage in, garbage out.
It's hard to accept the truth when the lies were exactly what you wanted to hear. Investing is simple, but not easy. Buy, hold & rebalance low cost index funds & manage taxable events. Asking Portfolio Questions | Wiki
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Re: what to do with money for passive income

Post by Marseille07 »

arcticpineapplecorp. wrote: Sat Jun 03, 2023 11:36 am but then what really is "fixed" income but an annuity, pension, social security?

bond yields increase and or decrease (you could buy a 10 year bond that's guaranteed to pay a fixed amount of interest but the payment may be lower when you renew in 10 years, or higher)

real estate may be consistent...until you have a vacancy or have to make repairs (there goes your cash flow back into the business)

lots of ways to get passive income (interest, dividends, annuity income, etc) but the question is does it have to be consistent and/or adjusting upwards with inflation? there's the rub.
Passive income isn't guaranteed for life or some duration. You're correct that even if you have a rental property, there may be a vacancy throwing a wrench in your passive income stream.
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Re: what to do with money for passive income

Post by secondopinion »

muffins14 wrote: Sat Jun 03, 2023 11:07 am
Marseille07 wrote: Sat Jun 03, 2023 10:26 am
muffins14 wrote: Fri Jun 02, 2023 8:22 am If you really want it to be passive, then invest in a 70/30 stock/bond portfolio and withdraw 3.5%-4% annually. Hooray, you’re done.
I'm not sure if this is necessarily passive unless your stock dividends & bond coupon payments consistently yield 3.5%~4%. Passive needs some level of "fixed income-ness" to it, and capital gain ain't one of them.
I mean if you can’t be bothered to log in and sell shares for money, you’re just too lazy. I’m willing to call something passive income if it involves logging in and clicking a mouse or trackpad or iPhone
It was not that long ago that trades cost a commission. Technically, there still is a micro-sized one. Selling is subject to behavioral risks and timing issues; a dividend has been a zero bid-ask spread commission-free hands-off sell for a long time.

While a sell might be easy nowadays for many investments, not everything that can invested into is easy in practice to sell.
Passive investing: not about making big bucks but making profits. Active investing: not about beating the market but meeting goals. Speculation: not about timing the market but taking profitable risks.
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Re: what to do with money for passive income

Post by Taylor Larimore »

Investor 456:

Welcome to the Bogleheads Forum:

I suggest investing in The Three-Fund Portfolio. It has given me many years of worry-free retirement income. You can read its many benefits here:

viewtopic.php?t=88005

Best wishes.
Taylor
Jack Bogle's Words of Wisdom: "The Three-Fund Portfolio will help you to develop a sound asset allocation strategy, make smart investment selections, and guide the implementation of your plan." -- "The beauty of owning the market is that you eliminate individual stock risk, you eliminate market sector risk, and you eliminate manager risk."
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Re: what to do with money for passive income

Post by mikejuss »

There's nothing passive about managing a portfolio of real estate. :annoyed
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Re: what to do with money for passive income

Post by radiowave »

investor456 welcome to the forum.

If you are asking about income that is not earned (passive) and your are not making efforts to make this money, e.g. buy real estate or invest in a business that you'll have to at least have a cursory interaction with, then a taxable account with a mix of total stock funds like the Vanguard VTSAX and a money market fund to be used as a cash instrument could be one of several strategies you might consider. So you would have idividends that would go into a money market fund, then from a cash flow standpoint, that is your primary cash for living expenses. If you do this within a single brokerage like Fidelity, you could add cash management, electronic bill pay, etc. So you would have cash in and cash out, just need to keep these balanced. If you have a need for capital purchases, e.g. new vehicle, you could sell some of your total stock mutual fund. This method does incur taxes on your dividends and capital gains, but keeps things fairly simple if your goal is to live off of investments. There is a separate discussion about tax deferred investments like 401k, IRA, etc. that will require mandatory distributions (RMD) out of tax deferred into a taxable account. Just adding this for a more complete big picture.
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Re: what to do with money for passive income

Post by TravelforFun »

I put a certain percentage of my portfolio on multifamily investment as a passive investor. Other people run the place and they distribute net income. After a few years, they would sell and distribute the net profit, if there is any.

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Re: what to do with money for passive income

Post by Wiggums »

investor456 wrote: Fri Jun 02, 2023 7:56 am Lets say that you have 2 million dollar to invest, what is the best way to make passive income from this so that you can retire in a year or two (and is that actually even feasible (I know it depends on lifestyle, so I am looking to maximize returns)?
You have identified several investment areas to consider. If you go this route, I would want them kicking off income before retiring. More risk, has the potential of higher reward. You haven’t mentioned the level of risk you are willing to take or what part of your portfolio 2M represents. My guess is that you are not looking for a five percent CD or fixed-income annuity. It’s difficult to give you advice without more information.
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Re: what to do with money for passive income

Post by MarkNYC »

Marseille07 wrote: Sat Jun 03, 2023 11:33 am
dbr wrote: Sat Jun 03, 2023 11:20 am There are various definitions of passive income, the only ones being defined with some exactness being the ones used by the IRS. In the IRS case dividends, capital gains, etc. are portfolio income and not passive income.
IRS's definition is odd because they discuss a new notion in "portfolio income." If they put it like that then you can never have passive income from your portfolio.
That's correct - you can never have passive income from your portfolio. Many people use the term passive income to describe income that is not derived from services performed. But income involves taxes, and the tax code defines "passive income" as income from a business in which the taxpayer does not materially participate. Income from rental real estate is specifically defined as "passive" (except for a RE professional). "Passive income" can absorb "passive losses", nonpassive income cannot.

So interest income and dividend income are not "passive income" - they are investment income, more specifically portfolio income. And while investment income can include passive income, in most cases investment income is not passive.

In order to avoid confusion, it would be better to avoid using the term "passive income" when what is really meant is investment income.
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Re: what to do with money for passive income

Post by Marseille07 »

MarkNYC wrote: Sun Jun 04, 2023 6:14 pm That's correct - you can never have passive income from your portfolio. Many people use the term passive income to describe income that is not derived from services performed. But income involves taxes, and the tax code defines "passive income" as income from a business in which the taxpayer does not materially participate. Income from rental real estate is specifically defined as "passive" (except for a RE professional). "Passive income" can absorb "passive losses", nonpassive income cannot.

So interest income and dividend income are not "passive income" - they are investment income, more specifically portfolio income. And while investment income can include passive income, in most cases investment income is not passive.

In order to avoid confusion, it would be better to avoid using the term "passive income" when what is really meant is investment income.
I mean...it's one thing the IRS and the tax code define passive income. It's another when we're having a conversation and look at dividends as passive income, even though the IRS might not call them so.

For all the intents and purposes, dividends fit the bill for income that is not derived from services performed, and they seem equivalent enough as far as discussing the context with respect to RE's rental income. I do not see much value in halting the conversation by busting out the IRS here; doing so seems to miss the point of the conversation.
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investor456
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Re: what to do with money for passive income

Post by investor456 »

Excuse the late reply, I thought I would get email notification if there was a response, maybe I need to set that up.

Appreciate all the feedback, and realizing now that my post was confusing. "Passive Income" in the way that I meant it, is definitely not correct after reading all these posts. And when I say "retire" what I really mean is to quit my 9-5 job and have more freedom. I want to do something with this money that generates the most amount of return, and I dont mind doing work/managing things. I guess when I was thinking passive, i meant anything where I am not stuck in an office at a 9-5 earning a paycheck, so sorry for the confusion.

I know the best ROI will depend on many things, maybe I was naively looking for an easy answer, like "put your money here". I did see a couple good posts on Vanguard MFF that gives 5% which is good. Currently about 70% of this money is in bonds, and 30% in stocks (very well diversified stocks). I went with a financial advisor (I know..) that told me the bond market was a perfect time to buy into (this is about 6 months ago). I actually talked to a couple financial management places who all told me the same thing about the bond market so I felt pretty good doing this.

So scrap the idea of "passive income". If you had 2M and were trying to just make that grow into the most amount of money possible how would you do it? Ideally while also having some it be liquid enough to live on year to year.
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Re: what to do with money for passive income

Post by Elric »

investor456 wrote: Mon Jun 05, 2023 9:55 pm If you had 2M and were trying to just make that grow into the most amount of money possible how would you do it? Ideally while also having some it be liquid enough to live on year to year.
TANSTAAFL! (There ain't no such thing as a free lunch!). The highest rewards come with the highest risks. How much risk can you live with? How much are you willing to lose? How much do you need to live on? If you need steady income from that $2M to live on, you really can't afford to take the highest risks, even if they might bring the highest return.

To look at extremes, the most amount of money possible would be to buy lottery tickets for the big payoff. But the most likely outcome will be a total loss. Similarly, you could try to figure out the next NVIDIA, but the odds are you will be incorrect, and could lose 100% of your investment. So let's look at investments with more reasonable risks.

I have never invested in being a landlord. That's certainly a viable approach to grow your wealth that others hear can add to. For stocks and bonds, here you'll mostly find folks who believe in low-cost index funds. And over the long haul, a 100% stock allocation will give you the highest returns. But you can hit a year when you lose half of your investment, and it's worse if you need to sell some of that stock to live off of, which you indicated. So a less volatile allocation between stocks and bonds (or these days, CDs) would likely be a better allocation plan for your needs, even though it sacrifices some growth.

More information is needed to advise further. Are you looking to live off just that $2M? For how long? How far are you from Social Security? How much income do you need each year from that $2M investment as part of living expenses?
"No man is free who must work for a living." (Illya Kuryakin)
Topic Author
investor456
Posts: 4
Joined: Wed May 31, 2023 10:42 pm

Re: what to do with money for passive income

Post by investor456 »

Elric wrote: Mon Jun 05, 2023 10:33 pm
investor456 wrote: Mon Jun 05, 2023 9:55 pm If you had 2M and were trying to just make that grow into the most amount of money possible how would you do it? Ideally while also having some it be liquid enough to live on year to year.
TANSTAAFL! (There ain't no such thing as a free lunch!). The highest rewards come with the highest risks. How much risk can you live with? How much are you willing to lose? How much do you need to live on?

More information is needed to advise further. Are you looking to live off just that $2M? For how long? How far are you from Social Security? How much income do you need each year from that $2M investment as part of living expenses?
I make a good living with my day job so my risk tolerance is moderate, no lotto tickets however. If I could invest the 2M and in 3-5 years see some solid returns each year I would like to live off of that. I am about 30 years away from getting any sort of social security. Im leaning toward dabbling in a few things (real estate, stocks, etc) and seeing what I like and where I can get the most return. This thread has made it very obvious that I dont really know exactly what I want other than to make more money from what i have...
toomanysidehustles
Posts: 594
Joined: Tue Oct 06, 2020 10:09 am

Re: what to do with money for passive income

Post by toomanysidehustles »

investor456 wrote: Mon Jun 05, 2023 10:51 pm
Elric wrote: Mon Jun 05, 2023 10:33 pm
investor456 wrote: Mon Jun 05, 2023 9:55 pm If you had 2M and were trying to just make that grow into the most amount of money possible how would you do it? Ideally while also having some it be liquid enough to live on year to year.
TANSTAAFL! (There ain't no such thing as a free lunch!). The highest rewards come with the highest risks. How much risk can you live with? How much are you willing to lose? How much do you need to live on?

More information is needed to advise further. Are you looking to live off just that $2M? For how long? How far are you from Social Security? How much income do you need each year from that $2M investment as part of living expenses?
This thread has made it very obvious that I dont really know exactly what I want other than to make more money from what i have...
Starting businesses which led to buying real estate is what did it for us...but we self manage and I don't think there is anything left that is truly passive like index fund investing. The returns on our AirBNB properties throw off so much cash that they are worth the hassle of fixing toilets, replacing batteries in Schlage Encode "smart locks" and bringing over 9x11 casserole pans in the middle of the night. While the market is blah, AirBnB is still hot hot hot. We love rental real estate and we have friends with 40+ properties in their mid 40's with 3m vacation homes in Hawaii (that they rent for $12-15k/month when they are not there). We are not quite there yet, but rental property investment returns seem to 5-10x index funds if done right.

We have enough real estate that we can now comfortably live off rents if we wanted to. But if you plowed enough into VTSAX or FXAIX early on then you could there too. But I was mid-30's before I started making good money and missed the early compounding years of my 20's.
Marseille07
Posts: 16054
Joined: Fri Nov 06, 2020 12:41 pm

Re: what to do with money for passive income

Post by Marseille07 »

investor456 wrote: Mon Jun 05, 2023 10:51 pm I make a good living with my day job so my risk tolerance is moderate, no lotto tickets however. If I could invest the 2M and in 3-5 years see some solid returns each year I would like to live off of that. I am about 30 years away from getting any sort of social security. Im leaning toward dabbling in a few things (real estate, stocks, etc) and seeing what I like and where I can get the most return. This thread has made it very obvious that I dont really know exactly what I want other than to make more money from what i have...
First of all I wouldn't get too hung up on the definition of passive income. Definition policing isn't all that helpful because everyone understands what you mean regardless of how IRS defines passive income in terms of an investment portfolio.

With that out of the way, the choice is completely up to you. If you want to go landlording using 2M, you can. if you want to invest, you can.

I think the RE route is less riskier but you need to DIY landlording. The portfolio side makes no promises - we certainly hope the market returns well, but fundamentally nothing guarantees that. Of course, 1X valuation of the assets would be the floor, but 1X goes out the window when we're trading at 25X of earnings.
Topic Author
investor456
Posts: 4
Joined: Wed May 31, 2023 10:42 pm

Re: what to do with money for passive income

Post by investor456 »


Starting businesses which led to buying real estate is what did it for us...but we self manage and I don't think there is anything left that is truly passive like index fund investing. The returns on our AirBNB properties throw off so much cash that they are worth the hassle of fixing toilets, replacing batteries in Schlage Encode "smart locks" and bringing over 9x11 casserole pans in the middle of the night. While the market is blah, AirBnB is still hot hot hot. We love rental real estate and we have friends with 40+ properties in their mid 40's with 3m vacation homes in Hawaii (that they rent for $12-15k/month when they are not there). We are not quite there yet, but rental property investment returns seem to 5-10x index funds if done right.

We have enough real estate that we can now comfortably live off rents if we wanted to. But if you plowed enough into VTSAX or FXAIX early on then you could there too. But I was mid-30's before I started making good money and missed the early compounding years of my 20's.
i am interested in airbnb, where did you start learning about this and how did you pick your markets? do you think you can still make money if you had a property management company doing all of this for you instead of doing it yourself? the county i live in has airbnb banned so it makes it difficult to manage myself.
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