Having just one source of income is incredibly risky. Life is full of uncertainty, and anything can happen. Maybe your corporate job gets outsourced to India. Maybe you went all in on Bitcoin at $20k in December. The reality is that any source of income is not permanent and has uncertainty.
So what is the best way to combat this uncertainty? Have multiple sources of income. When one of your streams of income starts to falter or disappears, you will have others to sustain you. Also, more streams equals more money! So how do you cultivate other streams of income?
Chose Something That You Are Already Good At
There are many directions you can go in terms of exploring additional streams of income. Whether its investing in the stock market, real estate, or starting a business, you need to go where your strengths are. If you want to build an IT consulting company and are an investment banker, and you have zero programming knowledge, it will take you a long time to learn the skills and then figure out how to make the business profitable.
Instead, it might be a better move to open an account with US stockbroker and get into stock trading. You already have the background in finance, so the learning curve will be much shorter than if you were starting an IT company with no coding experience.
Passive, Low Maintenance Streams
If you are looking for a stream of income that is low risk and will yield a consistent return over a long period of time, index funds are a good option. They do not require much time commitment, and they are fairly steady. Most low-barrier to entry, passive form of investments like this will yield 2%-10% return on your investment annually. They usually do not scale much over time.
Higher Yield Streams Of Income
If you are looking for something that will yield better ROI, the venture will usually take months and even years to develop. Day trading for example gives you the opportunity to make 5%-10% or more return on an investment in a few hours. However, it takes months and years to become proficient enough to do this consistently, and make a net profit in the long run. The same is with business ventures like building an E-commerce business or starting a consulting business. You can get these type of ventures to yield six-figures and more annually, but they require a lot of time and experimentation to get to that point where you get those kind of profits.
Building Other Streams of Income Does Not Happen Overnight
No matter what type of business or industry you get into, it will take time to cultivate and scale it. Everyone is always looking for that holy grail where you put in $1000 and it turns into $10,000 in a year (AKA Bitcoin last year). Unfortunately, passive investments that yield these kinds of returns in such a short period of time are extremely rare. These ventures are worthwhile if you have the right process, dedication, and time commitment. Nothing worthwhile in life comes easy, or without numerous failures along the way.
Find Streams Suited To Your Time Commitment and Capital Limitations
Another harsh reality of investing is that you need to have money to make money. Most real estate investments require a minimum $50k investment to participate. Also, 2%-10% annual returns do not mean much if you only have $5k to invest, so it may not be worth your time to put that into an index fund. You need to know what the capital requirements are for any other stream of income you are looking into, and also the time commitment needed to yield the expected return on investment.
Day trading and swing trading is a way to turn smaller amounts of capital into larger amounts. There are ways of getting around the pattern day trading rule, the rule that states you need to have a $25k minimum to make more than 3-day trades a week with a US stockbroker. Having a small trading account makes it take longer before you can make a living from trading, cause you have to grow it into a large one first. For tips about trading with a small trading account and how to grow it, check out this article here.
Free Trader Assessment
If you want some direct feedback on where you are as a trader and your trading goals, you should take our free trader assessment for advice on how to take your trading to the level. We will also direct you to our free webinar "How to make $200 a Day Trading" to give you even more free insight on how to achieve consistency in trading.