There are many different ways to create passive income streams. The possibilities are endless!
I earn passive income mainly from index fund investing and affiliate marketing on my blog, NotABondGirl.com.
Interested in creating passive income through index fund investing too?
Then you probably already know that the path to financial wealth is to have your money work for you. Investing in index funds allows your money to compound over time so that you can earn money while you sleep.
Not interested in stock picking and day trading? Want to sleep soundly at night despite the volatility of the markets?
Here’s how I minimize risks:
- Diversify across different asset classes
- Diversify within asset classes
- Diversify across markets, countries and currencies
- Diversify across time
What does it mean to be diversified across time? I’m talking at least a ten year long term investment strategy. No jumping in and out of the market.
Even the top financial gurus are not able to predict the right time to buy stocks. By adding to my index fund portfolio systematically over months and years, I reduced my risk and increased my returns over time.
Specifically, I follow author of “The Simple Path to Wealth” Jim L. Collins investment strategy.
I have a Vanguard brokerage account and invest in Vanguard Total Stock Market Index Fund Admiral Shares (VTSAX). It is a low cost index fund that hits all the diversification points mentioned above.
According to Collins, investing in the well diversified VTSAX is the simplest path to wealth.
He recommends investing 100% in VTSAX. Upon reaching FIRE, then rebalance your portfolio to 75% VTSAX and 25% VBTLX (bonds).
This was a major factor in helping me reach FIRE at 35.
Yes, almost 100% of my investment portfolio is invested in VTSAX. And I sleep very well each night.
Why not 100% in VTSAX? My previous 401K Plans and other job related retirement accounts did not offer VTSAX in the benefits package. So I selected the closest index funds to VTSAX.
Interested in taking a deeper look into this passive income strategy?
Or if you're like me and prefer audiobooks, I bought mine on Amazon to listen to over and over for the investment tips and mainly for the inspiration.
Check out the audio version of "The Simplest Path to Wealth" here.