Ask HN: Best Passive Income Method?

https://news.ycombinator.com/item?id=20052668

by NinjaX • 7 years ago

85 68 7 years ago

news.ycombinator.com

I am learning Python. I want to create some passive income streams while learning Python. I have free time available around weekends.I am working on few ideas of my own, but those will not necessarily generate income.

Which method of the following would you recommend?

ebook in a niche technical topic SaaS product that solves a niche issue mobile or web based game

lostmymind66• 7 years ago

You won't get anyone to tell you exactly how to make money. Anyone suggesting it probably hasn't actually done it and the ones that have don't want you competing in their niche.

freedomben• 7 years ago

The other category is people that have done it, succeeded, and now make another (typically large) income from teaching others to make a passive income (for a fee, typically large, of course).

mandelbrotwurst• 7 years ago

OP's comment doesn't read to me as though that's what they're asking for - they mentioned three potential high-level approaches and are asking for thoughts re: each of those relative to one another.

dmos62• 7 years ago

Those who are successful through luck will tell you, because simply knowing won't get you there. So I agree with the sentiment.

estebandalelr• 7 years ago

Invest in startups as a technical advisor. This has 2 effects: you will grow your network, and you will help the ecosystem. Those two, only my opinion, compound better than whatever financial instruments you can think of.

davnicwil• 7 years ago

Out of interest, what does this mean? Like, exchange equity for technical consultancy / advice instead of capital?

blocked_again• 7 years ago

How on earth can a person who is learning Python became the technical advisor for a startup? Genuinely interested.

1337biz• 7 years ago

You have to do an MBA first so you can match their business bs with tech bs...

GoldenMonkey• 7 years ago

Agreed. Any tips for getting into this? Have you done this yourself?

nprateem• 7 years ago

SaaS

derekp7• 7 years ago

One route to success is to take some other domain that you have expertise in, that most software devs aren't familiar with. Come up with an application that solves a problem in that domain, then market to those people.

Here's a simple example (this probably won't make any money, but it is good for illustrative purposes). If you look at an egg carton, there is a sell by date on there, but it doesn't list the date that the eggs were laid. Well it does, but not directly. There is a number on it which is the day number of the year (1 - 365), that represents when the eggs were laid.

So come up with an app, called "fresheggs", that just converts this number to a date, and will tell you how many days old these eggs are. Add location info to the app, and put in ads at the bottom that are coupons for the store you are in. You get paid when a user clicks on and uses that coupon.

newsoul2019• 7 years ago

Here is a free business idea! I ran into a niche problem the other day.

If you have a family with X family members, and each person has a loyalty number for Y airlines and Z hotels, that starts to become a lot to keep track of. Wouldn't it be great to see all of your loyalty accounts on a single page? Then you could have cool graphs, growth rates over time, etc. Also a tool to make sure that all family members are getting credit for all of their miles/stays.

pastor_elm• 7 years ago

SP 500 ETF

QuercusMax• 7 years ago

Why an ETF instead of an index fund?

nickles3• 7 years ago

ETFs allow for liquidation any time during trading hours. Mutual funds typically only allow withdrawal once a day using closing marks. ETFs are also structured more efficiently for taxation purposes than mutual funds.

davidw• 7 years ago

I think that's not a bad answer. Being frugal and stashing money away in the market is a pretty good path for some people. See: "Mr Money Mustache".

VTSAX covers the entire market and has really low costs.

blevin2• 7 years ago

Keep in mind that SPY yield today is 1.9% — below CPI — so you are losing value even before paying tax on that income. If you are hoping for capital gains / equity risk premium to provide extra return, you owe yourself to read a bit about where we are in the economic cycle, current corporate debt levels compared to history, and to look at what happened in 2000, 2008, and last December and visualize going through that. To get passive income beyond the dividend yield you’ll need to be selling shares, not buying them. Consider the scenario, hopefully unlikely but historically demonstrated, that it goes down 50% at some point, or spends an entire decade with zero total return. US equities have been a powerhouse but it’s worth some careful research if you are looking for passive income.

thorwasdfasdf2• 7 years ago

Yup and the frustrating thing about equities is, there's no telling when those sky high PE ratios will revert to their mean.

nickles3• 7 years ago

SPY yield today is 1.9%

That's dividend yield. If all companies stopped issuing dividends and instead spent the money on buybacks, you'd have a 0% dividend yield, but the same amount of money would be returned to shareholders without incurring a taxable event for remaining shareholders. Reinvesting dividends would allow for continued growth at whatever rate the ETF appreciated or depreciated, minus taxes.

below CPI — so you are losing value even before paying tax on that income

All other things being equal, the value of your money is decreasing at the rate of CPI regardless of whether it's in cash or equities. Cash can be thought of as a bond yielding a return inverse to inflation, whereas equities are securities yielding a variable, unspecified return.

where we are in the economic cycle

Determining this is difficult. Australia, for example, has not had a recession in 27 years.

current corporate debt levels compared to history

Debt levels are at nearly all time highs relative to GDP (2000: 22%, 2008: 24%, 2019: 33%), but interest rates are also favorable for companies and close to historical lows (Investment grade OAS: 1.64%, High Yield OAS: 4.19%).

Trailing S&P PE is 20.72, which is at the top end of the regime from 1928 to 1990, but roughly average for the regime for 1990 to present.

In short, timing the market is difficult.

module0000• 7 years ago

No: ETF decay is real and always has been. You're better off shorting an inverse ETF than buying and holding SPX.

edit: and shorting an inverse ETF has it's own problems, mainly what happens to your position if the market crashes - but that problem exists in any strategy.

projektfu• 7 years ago

You're going to have to explain that better. First of all, I don't think you can buy the actual index (SPX) but you could buy a future on it. Do you mean SPY? VOO? Second, I haven't heard of decay of unleveraged ETFs. And even for leveraged ETFs it's at least controversial to say it's a real phenomenon. Third, in what way does borrowing to short the index help you, given that you have to pay for the privilege anyway?

nickles3• 7 years ago

ETF decay is real and always has been. You're better off shorting an inverse ETF than buying and holding SPX.

This is bad advice.

Entering a short position requires paying interest on the borrowed shares, which may consume any decay you're collecting.

Short positions cap returns at 100% and have the potential for unbounded losses. Long SPY (S&P 500 ETF) produced returns of 280% since Feb 2009. Short SH (Inverse S&P 500 ETF) yielded 84% over the same period. In order to generate similar returns, you'd have to increase your position size periodically.

The long position also has the advantage of providing collateral, whereas the short position consumes margin.

unstatusthequo• 7 years ago

Winter is coming.

klinskyc• 7 years ago

SaaS. If you're learning Python, I'd imagine it'd be tough to write an in-demand ebook, and games are more of a labor of love.

SaaS lets you leverage other skills and domain knowledge you already possess.

napsterbr• 7 years ago

web based game

I'll share my own experience here, which is: compared to SaaS products, games are easily 100x more work for 100x less guarantees of income. Maybe it has the potential of going viral and earning you 100x more income, but still does not make up for the risk.

Of course this is just my personal experience on the topic. If income were my main motivator, I'd focus on SaaS instead of games.

Good luck!

ineedasername5• 7 years ago

Sure, all else being equal this may be true. But as with most things, it depends on quality & implementation of the idea. If the OP has a solid game idea that they're even a little passionate about, that may count for a lot more than grasping for a niche SaaS product that might have an audience. Although if the SaaS projecy were itself to go viral, there's probably a much larger upside than viral indie game.

coldtea• 7 years ago

Sure, all else being equal this may be true. But as with most things, it depends on quality & implementation of the idea.

And what makes you think that someone just learning Python and asking for ideas for passive gigs will hit either of those?

lhorie3• 7 years ago

Advice along the lines of "Follow your passion" is dangerously misleading.

Plenty of people have what seem like solid game ideas and are passionate about them, but don't get anywhere because making solo indie games requires a decent level of proficiency at a ton of vastly different skills (coding, design, growth hacking, etc). Plus, the gaming sector is extremely crowded and competition often employs unethical tricks (psychology manipulation, etc)

It's much easier to focus on the wrong things when developing a game, because there's so much to do, and there's always yaks to shave. And while one's "following their passion" of coding, they might be neglecting other crucial aspects of the project.

aakilfernandes• 7 years ago

Affiliate marketing is the closest thing to truly passive incom outside investing. That said, it's harder than it looks unless you can find a sticky niche with little competition.

ineedasername5• 7 years ago

That requires a decent amount of content though doesn't it? Given an existing body of content, blog posts, etc., then it might be "passive", but creating that initial bolus may not be.

jfk13• 7 years ago

My guess (not having tried any of these three!) is that the best chance of achieving some kind of income would be the SaaS product, assuming you really can find a niche issue and provide (and market) a solution to it.

For an ebook on a technical topic: it may be pretty difficult to write something so compelling that enough people will be willing to pay money for it. You'll be competing against what people can find free with Google, on stackexchange, etc.

And mobile or web games: there are so many of them out there, do you really think you can stand out from the crowd? I bet the proportion that actually make a worthwhile amount of money is pretty small.

thecolorblue• 7 years ago

I would vote for the Saas product but I am bias because that is what I have chosen for myself. Find a community first and then create something for them. If they need an ebook, write an ebook; if they need a game, make a game.

AlchemistCamp• 7 years ago

Almost no income is "passive". Like a farming plot, it has a certain momentum, but over time it shrinks and becomes less productive if you don't continue tending it.

Maybe you can build things that you yourself want to use but struggle to find. At the very least they'll help you, but there's a good chance you'll build an audience and maybe a base of customers if you build in public.

Jefro1182• 7 years ago

An ebook will likely be much closer to passive income than a SaaS product. Neither are passive though - if you want to have a consistent stream of income you will have to continue doing work. And you will certainly have to do a fair amount of work to get it off the ground (this includes marketing and/or sales, not just making).

For SaaS, having a product that you can put on third-party marketplace, e.g. Shopify apps, GitHub apps, etc. might be your best shot at reducing ongoing work since the marketplace itself will do some of the marketing for you. You still have to do lots of work though.

Mobile or web based game will likely take a lot of work and return very little.

Aggregating useful content and selling access to it is one relatively quick way to go. E.g. there are bunch of people who have just aggregated contact info of press or VCs and then sold access to it. This will take a fair bit of work to aggregate all the info but it's still relatively quick (certainly compared to SaaS) and probably won't require much ongoing customer support given how simple the end product would be.

Ultimately if you are determined to find something which is "passive" you are more likely then not going to fail. By all means think about how you can compress the time and effort required and reduce the amount of ongoing labour by you, but starting from "I want passive income" isn't going to work.

ghaff• 7 years ago

I'm not sure I'd ever recommend an ebook as a good passive income method. There are good reasons to write a book, including establishing credibility that leads to more revenue for consulting etc. But you're probably not going to make a lot of money from it.

Jefro1182• 7 years ago

I was referring more to relative passivity rather than income potential, but I haven't written one myself and I'm not too sure whether it's worth pursuing at all if your goal is money so I'll take your word for it.

ineedasername5• 7 years ago

Keep in mind that if there were an easy &/or universal solution to this question, then everyone would be doing it. As such, many of the "this worked for me" answers will probably represent some amount of survivor bias.

deadmetheny• 7 years ago

There's no such thing. You either do work up-front and hope it sells, or you continually work on something to improve it and market it. Anyone telling you otherwise is selling you something, doesn't have any experience in what they're saying, or got extremely lucky (e.g. the bingo card guy)

ksahin• 7 years ago

There is no "best" method for passive income. And I don't think "passive" income really is that passive either.

But, my experience: I made a really niche eBook, about Web scraping with Java: https://www.javawebscrapinghandbook.com

Writing the book was the easy part, I've been doing scraping for years. The most challenging part was ... marketing of course!

I wrote 6/7 blog posts about this subject. In each blog post, there is a paragraph that talks about the book. I shared those blog post to my mailing list and on Reddit/HN (I didn't get any upvotes on HN...).

Now I have ~10 000 visits a month on the blog, 80% comes from search engines. Out of these 10k visits, about 200 visit the book sales page, and I sell 10-15 copies a month for ~ $400-$500.

It is not that passive because I have to fight to stay on the first 3 links for terms like "java web scraping" so this mean regularly upgrading my content etc. If I don't do this, my rank will slowly decrease on SERP and the sales too.

I was 24 when I wrote the book, I'm not even a native English speaker, you can do it :)

If you go this way, test your idea by blogging around a subject, and you will quickly see if people are interested by this subject or not.

Good luck!

thorwasdfasdf2• 7 years ago

There are many thousands of indie developers and companies who have tried and failed. Even the world class gaming companies have had an extremely hard time producing games that make money, these days. Sure, there was a time when making money in games was easy: that was before 2011. If you have a time machine and can go back to that time, then you could make a lot of money. Barring that, I would say it's nearly impossible.

Stick to SaaS, go into a field that's completely unsexy and solve a problem. It's still insanely difficult, but your odds might be slightly better than winning the lottery.

joss82• 7 years ago

As a moderately successful saas founder, I'd advise you to take a series of increasingly better paid freelance gigs, then invest the surplus into dividend stocks.

A successful saas is a lot of work and not passive at all.

Good luck! It's lots of fun either way :)

DVassallo• 7 years ago

For me, the best form of passive income is income you get from an activity you would do anyway (on your own terms) even if you didn’t have to work anymore. I know, this does not exactly satisfy the passive definition, but it is probably the most attainable form.

cellis2• 7 years ago

I think there's only one way to earn passive income reliably at this point. And it's not going to be easy ( otherwise, everyone on HN would already be doing it! ). Here it is:

  1) Learn how to interview for top tier companies in your free time. 
  2) Interview at those companies. 
  3) Work at those companies really hard, make $300k/yr. 
  4) Work for 10 years, save 200k/yr. 
  5) Invest in ? 
  6) You've now achieved purely passive income on a $2million principle.

I haven't done it, but I know people who have.

cellis2• 7 years ago

And please, for the love of all that is pure, DO NOT try to build a game hoping to make money. ~ former game dev

lhorie3• 7 years ago

If you work at a big bay area tech company, between a third to half of those 300k/yr are actually in equity (stocks), so step 5 is sort of already done for you. There's also ESPP that lets one buy even more stock at a discount, which is basically free money.

However, taxes and cost of living are also incredibly high, so realistically you're probably not going to be saving 200k/yr (though you could probably still save a cool 100k/yr without much trouble).

seansmccullough• 7 years ago

You should sell your RSUs on rest and diversify. If you don't diversify and something happens to your employer, your could lose your job, the value of your home could go down, and your investment could lose a substantial amount of value, all at the same time.

robertothais• 7 years ago

Taking into account average market returns[1] in a 60/40 stock/bond portfolio, one would only need a bit more than 7 years to reach $2 million saving $200k/yr.

In practice though, the expected return on such a short timeframe would be quite uncertain given stock market volatility.

[1] https://personal.vanguard.com/us/insights/saving-investing/m...

ryanmercer• 7 years ago

Best Passive Income Method?

VTSAX, reinvest the dividends.

rpedela• 7 years ago

Games, books, and other entertainment forms only provide passive income if they are hits, and it is hard, if not impossible, to predict a hit. Tools are a much better path because you don't need to guess if people will like it since there is an obvious market. You just need to execute well and sell which is also hard, but not as hard as coming up with a hit.

In other words, more like Stripe and less like Angry Birds.

nyxtom• 7 years ago

The best way I've found to have some "passive income" is to manage my finances better.

- Use a savings account that is completely disconnected from your checking account bank. Bonus if you find a high yield savings like Synchrony for instance (2.25%)

- Use a method for separating what you spend from what you pay monthly on mostly predictable billing amounts (bills that end up being the same each month). I have 2 checking accounts, one for spending and one for billing. I use schwab banking. The main banks like WF and others all charge fees. Fees that could be used for other things like gas or other small monthly expenses.

- Automate everything (savings, bills, spending)

- Apply financial minimalism where possible. Minimize unnecessary spending, increase spending on things you actually like, set goals associated with this and fearsetting for things that you know you probably shouldn't be spending money on. (Perceived net quality of life should improve)

- Take advantage of automated investment portfolio offerings (or do the research yourself and invest).

jawns• 7 years ago

One way to think of passive income is investing your time up front to develop a product for which you do not receive all of your compensation right away.

At my day job, I put in 40 hours of work and then get paid in full for those 40 hours shortly afterward.

In contrast, as an author of science-themed gift books, I invest a lot of time up front to research and write the books and a moderate amount of time to market them. And then the books have the potential to bring in recurring income over some indeterminate time horizon.

In one sense, getting royalty checks every six months for a book I wrote years ago feels passive.

On the other hand, if you have the choice between getting paid in full right away or getting paid over the course of many years, wouldn't you rather get paid quicker?

Ask lottery winners. Most choose the immediate lump-sum payment, even if the 30-year annuity is considerably larger.

So if you're looking for passive-income opportunities, please remember to take into account opportunity cost. Could you be doing something that gets you paid in full right away?

thrower123• 7 years ago

It's not exactly passive, but real-estate is where you want to go for a reliable, substantial, secondary income stream. Obviously, if you are in an insane market, it's difficult to get your foot in the door, but there are some options. One can typically get an FHA loan for multi-family properties of four units or less, if you are going to be occupying one of the units, which allows you to get in the substantially lower down-payment. Renting the other units will cover the bulk of the mortgage, and you also have a roof over your own head, and you should have enough slack to make extra payments. PMI is kind of a pain, but unless things do go over a cliff, within a couple of years you can build enough equity, and valuations will go up enough that you can refinance out of FHA.

kasperni• 7 years ago

Rich and generous parents...

dang• 7 years ago

https://hn.algolia.com/?query=Passive%20Income%20points%3E30...

0xEFF• 7 years ago

None of the options are passive income. Passive income are from things like dividends, rents, and royalties. The closest item on the list is the ebook, but even then you'd be more in the role of a publisher which is very active on the marketing side.

joeax3• 7 years ago

My 0.000002 BTC: I've tried several side projects over the years, a productivity SaaS app, a dating site, monetizing an open source project. I eventually gave up on those and wrote a sci-fi novel that generated a sizable income stream for a while.

I will say that it's a crowded space and eventually your income will peter out unless you spend big on advertising. But if you say, crank out one novel per year, you could potentially achieve economies of scale and generate a sizable (salary-replacing) income stream.

jammygit• 7 years ago

I never thought I’d read a software developer recommending writing as the path to riches.

Could you share more about getting your book published? I’ve written 1.5 novels but never tried to get anything published. What was the process like?

joeax3• 7 years ago

I self-published on Amazon. I got inspired by an author friend who had like 20 books on Amazon and quit his job to write full-time.

Steps I took:

- research the science for my story

- write an outline of my novel

- read a book on how to write a compelling story, for me it was "Writing the Breakout Novel" by Donald Maass

- write the novel

- edit the novel iteratively, hiring an editor if necessary (strongly recommended for most people)

- send out copies to friends and family for feedback

- convert to Word doc to an epub file

- hire a cover designer

- publish on Amazon

- run ads on BookBuB, Facebook, Amazon

gremlinsinc• 7 years ago

Saas is the easiest fruit---assuming you can find a niche product with market fit, or even a saturated market w/ a unique twist --as long as you get a couple hundred users you're in MRR territory it won't be fully passive but you can maintain or hire others to fix stuff and keep getting the MRR.

bshoemaker2• 7 years ago

Save aggressively, invest in index funds, and watch your money grow passively.

bshoemaker2• 7 years ago

Save aggressively, invest in index funds. This is by far the most reliable, simple, profitable strategy you can implement.

b3b0p• 7 years ago

Not sure if this counts, but I have a couple Vanguard funds, the monthly interest and dividends is about $1000/month on average. I also don't own a car, but do own a parking spot in downtown Minneapolis that I lease out for $150-$175/month (it came with my condo).

Seems like it's about the closest to true passive income as you can get as I don't do or even really think about either.

hsnewman• 7 years ago

Get a job with a retirement. I did. I love the true passive income stream I get each last day of the month.

Ask HN: Best Passive Income Method?

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