Passive investing is an investment strategy used since the early 1970s that has its roots in academic research.
Passive investing, unlike active investing, is not about trying to beat the market by trying to select specific securities that might have a greater return than the market or by entering or exiting the market at the right times.
On the contrary, the passive investor invests in the market as a whole through a much-diversified basket of securities because he is convinced that it is impossible to predict with accuracy and repeatedly which securities will beat the market in any given year. Likewise, the passive investor tends to buy and hold onto the securities in which he invests for the long term, even during a crisis, because he thinks that it is impossible to predict when the “right” time to buy is or sell securities. The Passive Investing Returns work perfectly in this case.
This investment approach most often uses passive funds such as index trackers (Exchange Traded Funds or ETFs). The costs associated with the passive investment are generally lower than those of so-called active management because a passive fund minimizes management costs (there is no need to have an employee in the fund who analyzes all the securities. market and tries to predict which will do better in this year, the fund simply buys all securities in the market) and trade (securities are bought and held for a longer period than in an active strategy).
Best Passive Investments in 2021
Real estate, the stock market, drop shipping, or even creation or due on sale are among the most popular investment areas at the moment. Let’s discover together the most interesting passive investments for this year. These tips are not exhaustive but will cover all the subjects aimed at making you get the maximum benefit from your investment.
Buy High Dividend Stocks
Passive investing in the stock market is particularly profitable if you choose the right company.
What is a high dividend stock?
The dividend represents the portion of the company’s profits that is paid periodically to shareholders. The frequency of payment and the amount received for each share are determined following a vote by the board of directors.
A high dividend stock, therefore, generates high passive income. The advantage is that depending on the company, you will be able to receive dividends regardless of its performance on the stock market. So it’s a good way to secure passive income without having to worry about the stock price in question.
The payment of dividends to shareholders is not systematic and compulsory. The profits are for example used to improve the services or the functioning of the company in some cases. The decision always rests with the board of directors of the shareholders.
How Much Can You Earn By Buying High Dividend Stocks?
The dividend paid to investors usually varies according to the profits of the company. A successful company offers up to more than $ 10 per share. A slight general decrease was observed due to the COVID-19 pandemic which resulted in a drop in turnover. The total amount you can earn then depends on the number of shares you own.
Important note: some companies choose to pay fixed dividends, regardless of net profits, to retain shareholders. To find out about companies that follow this logic. If you also want to know which stocks are the most promising in 2021, also consult experts on which stocks to buy right now.
Benefits of Passive Investing In Stocks
- A remuneration that can be very high
- Ease of access to passive investing
- No maintenance is required.
- Periodic income that is sometimes unstable
How to get started in the purchase of high dividend stocks?
It is advisable to register on a site of a reliable broker to discover all the interesting information on listed companies. You just have to choose the one that seems to offer the most dividends and buy one or more shares.
Invest In Real Estate
Real estate investment is often a safe and interesting passive investment. What is a passive real estate investment? This type of investment consists of acquiring real estate and operating it, renting it out in order to receive regular passive income. These can be residential, commercial, or industrial buildings, land, chalets, parking spaces, or even warehouses. It is a classic rental investment.
How Much Can You Earn By Investing In Real Estate?
The net gains generated by a passive real estate investment depend essentially on the size and quality of your assets. They are on average estimated at around 3,500 to 4,500 $ per month for accommodation in town. Of course, this amount depends on the size of your accommodation, its location, etc.
Advantages of Real Estate Investment
- Stable income
- Tax benefits, in particular, thanks to Pinel’s law
- Increasing yield over the years
- Disadvantages of real estate investing
- Requires a significant start-up fund
- Regular maintenance essential
As we said above, you usually need to have a high starting bankroll. Most of the time, you have to take out a home loan from a financial institution. Do a thorough study with the help of a professional to find the best markets in your area and determine how much to borrow.