Have you ever thought about investing? If not, you should. Otherwise, you risk spending your money on things that never pay you back.
Warren Buffett said it best: “If you don’t find a way to make money while you sleep, you will have to work the rest of your life.”
When it comes to investing, there are two major approaches: active and passive. Active investing requires your time and involvement to generate returns. Passive investing, on the other hand, lets your money do the heavy lifting without your daily input.
Which is better? It depends on your interest, expertise, and time. Some enjoy the thrill of hands-on deals, while others prefer to invest once and let their money grow quietly in the background.
Let’s break it down with three examples: franchises, real estate, and stocks.
- Franchise: Active investors run the day-to-day operations, from staffing to customer service. Passive investors, however, hire a manager and collect returns without managing the business.
- Real Estate: Active investors search for properties, negotiate deals, and manage tenants. Passive investors, by contrast, provide capital to an active investor or syndicator and earn a share of the returns.
- Stocks: Active investors research, buy, and sell stocks individually. Passive investors, however, put money into index funds or ETFs, letting professional managers handle the trades.
The cost of getting started varies:
- Franchise: Often requires hundreds of thousands of dollars.
- Real Estate: Can range from a few thousand to hundreds of thousands, depending on your niche.
- Stocks: You can start with as little as $25, depending on your platform. Some even allow fractional shares.
Ultimately, you want your investments to generate strong returns while keeping your risk at a level that lets you sleep peacefully. High-risk investments can yield high rewards, but only if you can stomach the volatility.
If you haven’t added passive investments to your portfolio, consider it. It’s one of the best ways to ensure your money makes friends—even while you’re out with friends or fast asleep.