The Allure And Alternative Path To Passive Income - Part 2 of 2

I guess some of you have figured out for yourselves what's the alternative path for adopting a passive income strategy really is. Wink.

I wanted to say "most of you", but who am I kidding? 


Coming down the mountain

Yup, your favourite shepherds who have already reached their X amounts by Y years, and where working full time is just an option, they didn't start with a passive income strategy from day 1, did they?

That comes much later. 

Their passive income strategy only starts when they were coming down the mountain.


Climbing up the mountain

So what were the common strategies they have used to reach the mountain top?

Let me list the 2 most frequent ones:


1) Earn more; save more (preferably earn more)

Let's face the facts. It's better to earn $10K and save 20% than to earn $3K and save 50%. 

It does not matter whether you work for someone or is self-employed, if you belong to the higher income brackets, you already have a head-start in earning and saving your first pot of gold!

And that's without any investments needed! How cool is that?


2) Make money from property

If you go round asking your uncles, older cousins, parents, etc; you'll find more of them made money from properties than from equities.

You may be nodding in agreement as that's where your first few hundred thousands came from... You know, the 2 bites of the cherry, upgrade, downgrade... 1st rental/investment property, 2nd rental/investment property... 

The real booster is the 5:1 leverage used. You know it; I know it.


Harder but possible

OK, the next 2 strategies are adopted by many; but few manage to pull if off successfully:


3) Speculation with leverage

Look, if I earn a below median salary, don't have much capital to speak of, how else to acquire my first pot of gold before 55? 

You think why some of us desperately want to withdraw our CPF money at 55? That may be our only opportunity to see something more than $100K in our hands... 

We are dealing with emotions and sentiments here... So please keep your holier than thou financial literacy supremacy to yourself. If you don't mind!

That's where the seduction of derivatives like Options, Futures, CFDs, Spot Forex, etc; and Penny Stocks trading come into the picture.

It's like Toto. Put in little; hope to win big big!

And just like Toto, the majority lose money so the few can win :(

You know the author of the very successful Market Wizards series? Whenever Jack D. Schwager makes money in his futures account over a certain limit, he'll transfer the excess funds into boring US Treasuries - passive income from trading?


4) Business Ownership

You know something funny? Many draw their inspirations from embarking on a passive income strategy from Rich Dad Poor Dad, yet the whole essence of the book is about the benefits of having our own businesses!

Talk about poor reading skills...

Of course the failure rate is high; but so are the rewards!

Is this why financial businesses are so eager to sell us their financial products and services to "help" us to reach our financial goals?  

And why some business owners have so much passion to educate us on financial literacy?

I still can't erase the funny sight of that young Sikh trainer who let slip he made his first million through his Trading Academy... Hello!

You don't find many business owners as financial bloggers. But they do appear in some investing forums. 

If you're observant, you'll find their passive incomes are not restricted to dividends from stocks - they include fixed incomes from bonds and rentals from physical properties. 

Now that's diversification!

If you have several taps of passive incomes (stolen with pride from the fisherman), if one pipe gets choked, the other taps are still flowing!


Alternative path?

Some of you reading here may be reflecting it's not so alternative after all...

Well, that's for you to decide for yourselves.

Whether it's better to EARN our first pot of gold first, then SECURE our passive income flows. (Note: its plural flows)

Or to start with a single gold coin and hope the passive income from this single gold coin will help us turn it into a pot of gold.