If you want to sit in the shadow of passive income in the future, you need to plant an investment tree today!
When it comes to our current investments, you probably know that my wife and I mainly invest in residential real estate and certificates of deposits (CDs). When it comes to investing time, which is our most precious resources, I invest in developing my own online business which is this website and YouTube channels. Not many changes here.
And, slow growth is expected because I mainly invest in the least risky way possible. I do it to protect the capital and generate stable and predictable passive income.
My active income streams
Here are my main sources of active income:
1. Full-time jobs
Both me and my wife have full-time jobs. Me and my wife have highly-specialized professions. As you already know, I teach Business Management at international schools in China, while my wife sells European technology software to Chinese customers. We invest our time, freedom and energy to keep our full-time jobs going. These jobs provide steady monthly income for our family. We have both public and private health insurance and other benefits. My wife does sales and business development in China of groundbreaking eye tracking technology software. The company she works for is a public limited company from Sweden listed on the stock exchange.
We have been working full-time in China continuously since 2011 after graduating from the university. My wife has a BA degree in business management and attended a couple of executive education programs. I have a BA degree in business management, MA degree in business communications, and a couple of postgraduate diplomas and certificates in business journalism and teaching business internationally. Because our contracts our confidential, I am not in a position to publish how much each of us earns per month and what our perks include.
If you happen to have stable full-time job, I recommend that you continue working as long as possible, so you can receive steady cash flow every month, feel stable and maintain peace of mind for your family.
I consider our full-time jobs as being a Cash Cow revenue stream for the family. Our jobs are already found and stable (as we have been doing what we are good at for the last 10 years), and they produce steady cash flow every month. Also, the companies which we work for are very stable mature businesses. While a full-time job is not really a passive income, selling some of our time for money makes sense in our case
2. Part-time jobs
These are side projects that we do from time to time to bring extra income and boost our family budget. Again, we invest our time, freedom and energy. Once or twice a year, I do examining for The International Baccalaureate (IB). I am the IB Examiner in Business Management for the Diploma programme. I also write from time to time about business management for several media. And, about teaching business internationally for a few companies that develop business teaching content.
My other part-time projects, that I have been involved in for quite a while, include information brokering, business consulting and corporate trainings. My wife also does some freelance work for large multinational businesses mainly in relation to sales and development of technology software for the Chinese market. Unfortunately, I cannot share any details here as these are highly confidential projects.
I also consider our part-time gigs as being a Cash Cow revenue stream because they are fairly predictable, and we have been doing them for a few years already. You can check more about what I specialize in in SERVICES.
My passive income streams
Here are my main sources of passive income:
1. Real Estate
We own residential real estate. Both real estate and businesses are two great ways of building wealth and storing wealth. People work every day and spend time at home every day. Anyone who invests in rental apartments to generate stable passive income can expect annual returns to be somewhat between 3% and 8% annually on average. Once you purchase the apartment, finalize all the paperwork related to buying real estate and find stable tenants, renting your apartment to other people can be a great source of passive income.
Renting your property is an awesome way to generate stable passive income. Having stable tenants who pay on time is crucial. Remember, the smaller the apartment, the higher the returns. But the larger the apartment, the more stable the tenants.
Realistically, you can expect to generate from this Cash Cow around 5% in annual returns after all property management fees, sporadical maintenance costs and TAXes.
2. Bank deposits
I invest in certificates of deposits (CDs) which is a fixed income financial instrument offered by majority of the banks around the world. I am building the snowball allowing numbers to grow exponentially over time. So, I just need to wait long enough for patience to finally pay off.
In China, Certificates of Deposit (CDs) are protected (insured) up to RMB500,000 for each bank account. Presently, I have been aggressively putting money into bank deposits since the beginning of 2020. And, I plan to continue doing so this year in 2021 and until the end of 2022. Interest rates in China are quite high comparing with the rest of the world.
The current three-year saving rate is roughly as high as 4% annually. I like investments that give me secure and predictable returns instead of the highest returns. And, I would rather take risk-free 4% or 5% annually than 10% annually with 50% risk. I do not really mind inflation that much (one day I will write more about it).
Once all the bank deposits are set, they will run and renew themselves pretty much automatically. Therefore, bank deposits will change from being a Star to being a Cash Cow. In general, you can expect annual returns on average between 2% and 5% from investing in CDs. So, this income stream is my Star passive income source as it takes a big part of my free time and already started to generates returns.
3. Online business
I invest my remaining free time mainly in two things – my family and my own online business which is this website. It is a great benefit because it allows me to work on my own projects under our own brand. I launched this website mainly with two reasons in mind. First, to make it as a hub where I can put all of my life experiences together. And second, to make it as an economic engine to realize strategic goals of my family in the long-term perspective. Another passive income source for my family budget and a part-time job I could do when I get older, and then pass it down to my children to play with.
Well, I treat it as a long-term project, so after 10 years of building Super Business Manager, I expect this website to bring between USD$1,000-USD$3,000 in passive income without much new work. As of today, this website remains a Questions Mark revenue stream. It will be a consumer of my free time and energy until it can be sufficiently turned into a Cash Cow.
4. Stocks
I have started preparing myself for stock market investing in the medium-term future. Perhaps in 2023, I plan to start buying marketable securities. I will be mainly focusing on simultaneously investing passively in Index Funds and investing actively in dividend stocks of multinational companies. Most likely, I will be using the 50-50 allocation split between Index Funds and individual stocks to build the portfolio. And, dollar-cost averaging to add shares instead of trying to time the market and buy a big position at one time.
A. Index Funds: I have already prepared the list of 10 potential ETFs. It includes the popular ETFs tracking total stock market, S&P500 Index and NASDAQ, as well as smaller ETFs tracking high dividend yield, utilities, developed markets and small-caps. The three brokerage companies include Vanguard, BlackRock and State Street.
B. Individual stocks: I am currently working on preparing a list of companies for my portfolio. So far, my broad list includes around 300 companies listen in the US. But, I will perhaps boil it down to as many as 150 businesses to finally short-list only a handful of around 20 great businesses to invest in anytime that pay quarterly dividend. These are well-established multinational American companies (from the Dividend Aristocrats list) such as Johnson & Johnson, The Coca Cola Company, Procter & Gamble, McDonald’s Corp., etc. Annually, these companies usually return between 2% and 6% dividend yield on average. Those 20 fantastic companies will be:
(1) Very well-established multinational corporations with long history of success and strong recognizable brands.
(2) Having predictable future earnings based on proven business models.
(3) Generating decent profit margins from large product portfolios.
(4) Having strong balance sheets including lots of free cash flow and low debt.
I am not interested in investing in risky start-ups whatsoever or investing in companies that do not pay any dividend at all = not share their profits with shareholders.
C. Real Estate Investment Trusts (REITs): If I ever liquidate our residential real estate, most of the proceedings will most likely be invested in REITs. This will allow me to keep being invested in the real estate sector of the economy, but in a more liquid way than owning physical apartments. In this way, I will not have to be tied to any specific location. Currently, I keep an eye on around 20 popular REITs mainly from the US market.
This income source might be my Next to Be revenue stream.
Currently, I do not consider any other investments to put my money into, and it will most likely not change in the short-term and even in the medium-term. If I have some spare cash, time and energy, I will just invest more in one of the above six income streams.
How much passive income our investments earn?
I am investing with the idea of building four independent passive income streams with each of them generating around USD$15,000 per year, so in total USD$60,000 per year. This is in addition to our full-time and part-time jobs. By the end of 2026, each Passive Income source is expected to bring us roughly RMB100,000 per year (~USD15,000 per year) giving altogether around RMB400,000 per year (~USD60,000) in total.
Overall progress?
2022: 36%
2023: 49%
2024: 40%
2025: 28%
2026: To be determined
In summary, our purpose of saving money and the main aim of investing is to generate stable recurring passive income. After December 31, 2026, we could easily retire early anywhere in the world joining the financial movement FIRE – Financial Independence Retire Early (FIRE) to live from our passive income.
