Even people who have the experience of investing financial resources in various spheres of the economy confuse the concepts: "passive income" and "passive investment." Virtually everyone perceives them as equivalent or very similar in meaning. Unfortunately, even on the Internet, the definitions also give a mistaken understanding of what passive investments are, which in turn forms an incorrect representation directly from people.
The essence of passive investment
The meaning of passive investment is not all that the depositor does nothing and isn’t involved in the process of turnover of the invested funds. The essence of such an investment is that the default investor agrees that he deliberately refuses to participate in managing his own capital for profit in the shortest possible way.
The lack of direct participation in investment activities in the management of free money, which is a certain capital, is a passive investment. As a means of profit, this is an investment portfolio with a high degree of diversification. At the same time, managers take into account the investor's preferences for investment objects and assets that are attractive to him.
If you want to invest in precious metals, then this asset will necessarily be in the percentage ratio in the investment portfolio. Conversely, if you don’t see prospects in futures, then noone will impose them on you.
Absence of duties and opportunities for direct asset management with passive investment and set the tone. By investing through intermediary organizations or individuals, you eliminate yourself from direct or indirect participation in the management of capital, but you will invariably make profit according to the arrangement.
What is convenient about passive investment?
With passive investment, the owner of financial resources doesnэt have to develop a strategy of financial management. There is no need to seek out the best assets among those available on the market, and even less so is it freed from risks when trading on the stock or currency exchange. Make investments and wait for the agreed percentage of profit each month.
Distinctive features of passive investments
- profit is not brought to the investor by his labor activity, but by the invested capital;
- trust management of third parties eliminates the need to make decisions regarding the purchase of investment assets;
- all relations between the investor and intermediaries are fixed by a bilateral agreement that cannot be unilaterally terminated;
- the funds invested are protected by insurance against any force majeure circumstances;
- investment terms are always arbitrary and only the investor depends on the duration of investment;
- investment is managed under a high level of diversification, which guarantees passive income even in the most unfavorable situation in the financial market.
Actual types of passive investment
The horizon of financial opportunities for investment has long expanded in various directions, but the classical options remain in demand along with ultra-modern types of investment. It includes:
- - investing in real estate/subsequent resale, leasing/;
- - investing in movable property, various vehicles/leasing, renting, etc./;
- - opening of bank deposits for cash/receiving interest under the terms of the contract/;
- - opening of MMI or investing in precious metals/long-term expectation of price change or speculation following seasonal price fluctuations in the market;
- - investing in securities in the stock market/making a profit when changing quotations of the value of the asset/;
- - investing in equity participation, units, mutual funds;
- - investment under trust management in investment portfolios of large volumes with a high level of diversification;
- -investing in the PAMM-account in the foreign exchange market.
The main advantages of passive investment
1) The investor is spared the time spent looking for available assets that can make a profit.
2) With trust management, the level of capitalization is quite high.
3) Investments are protected by insurance in case of any force majeure circumstances, the investor does not take any risks.
4) The investor has the opportunity to enter and participate in large-scale projects, which he would not have accessed independently, due to the insufficient amount of capital.
5) Profits can be received as passive income under the terms of the arrangement, from weekly payments, monthly and annual.
Prospects for passive investment
The experience of foreign countries has proved that passive investment is a convenient financial instrument with a high level of capitalization. At the same time, earnings are distributed among the participants in the process according to their participation and clearly allows everyone to make a profit. And the trust manager, and directly to individuals investing in the proposed portfolios.