Passive Income Streams

For those who want to share.....I thought it would be interesting to find how you are creating income streams, not necessarily property, any asset class.

What is your end goal $ pa you are trying to achieve and timeframe?


MTR

 

My goal is $3,000 nett pm (my current salary minus my current mortgage payments) with no debts.

Currently I get $0 nett pm from passive.

I have quite a bit of work to do over the next 10 years

 

I focus more on multiple streams of income, rather than 'passive'.

That way, if I don't have money coming in from one stream (job, lecturing, development, share trading) I have others to maintain my cashflow and keep food on the table.

So many people seek to have one income stream, and a big one at that, which usually ends up with a level of 'golden handcuffs' to some extent.

 

365k from resi property in the next 12 months, no other assets, plain and boring.
Might take a bit longer cos I plan to stop working before the end of 12 months, so bye bye income to pay down debt.

 

Our passive income is currently 2 x IP's, a soon to be opened Holiday Villa complex, some work industry co-op share dividends.

 

I have a few different income streams.
None are passive

I

 

Me too. Even an IP with a property manager is not really passive is it? There always seem to be some sort of drama at mine but I have some shockers - this week it's a $1800 water bill and we know it's not a leak as plumber was sent out so it's water theft. I'm pretty sure it's the old owner and he's going to get a horses head in his bed VERY soon.

 

I think its a myth. I don't know anyone who is super successful and wealthy, and is also truly passive with their management of assets. If anything you get busier or delegate a lot more but you still need to follow up so its not passive .

 

I am developing three income streams:- residential rent, listed securities and super.

Right now, my dividends stream is low but developing. I would rather diversify into managed funds and ETFs etc as I don't have any interest in direct shares. Something I would like to explore in the future is leveraging residential property to buy listed securities because the interest rate is lower for a residential mortgage than for a margin loan. I was planning to start a thread on this soon.

$100k per annum (indexed to inflation) over 20 years.

 

If you put 4mil into an ETF, what kind of returns could you expect?

And how risky are ETFs? have they gone down like 25% or more in the past?

I know pretty much nothing about shares.

 

One of the main Aussie ETFs is VAS (index of 300 largest listed companies weighted by market cap).

Current yield is 4.5% with franking of around 70% (pre paid company taxes) so gross yield is in the 5s. You also get capital gains or losses on top of that.

Drop was around 50% during the GFC from memory. So it is volatile. The yield wasn't affected nearly as much as the price so if you were living on the dividends you wouldn't have to cut your lifestyle by 50%.

 

I have no idea. I don't even know how the income stream works from these products. All I know is:-
1) products exist that can be traded but are not direct shares
2) these products offer capital growth and an income stream
My idea would be in the accumulation phase, so reinvest the income. After I retire, I would use the returns as part of my income stream.

As far as I know, higher return funds would likely be more risky and lower return funds would likely be less risky. Best to diversify to some extent to buffer against large drops.

@The Falcon will know more about it than me. Also, there is a thread!

Exchange Traded Funds (ETFs)

 

Dividends are paid 4x a year with VAS. Most stocks that pay dividends do 2 a year.

 

Define your version of risk, because price variation is only one element of risk.

Lets say you're putting money into VAS, its a $12,000,000,000+ fund, its top 15 largest holdings by percentage are:

APPLE INC 1.7587%
MICROSOFT CORP 1.2589%
EXXON MOBIL CORP 1.1737%
JOHNSON & JOHNSON 0.9882%
AMAZON.COM INC 0.9156%
GENERAL ELECTRIC CO 0.8982%
FACEBOOK INC-A 0.8626%
WELLS FARGO & CO 0.7700%
AT&T INC 0.7598%
JPMORGAN CHASE & CO 0.7529%
NESTLE SA-REG 0.7396%
ALPHABET INC-CL C 0.7288%
PROCTER & GAMBLE CO/THE 0.6910%
ALPHABET INC-CL A 0.6907%
PFIZER INC 0.6721%
VERIZON COMMUNICATIONS INC 0.6545%
CHEVRON CORP 0.6047%
ROCHE HOLDING AG-GENUSSCHEIN 0.5867%
COCA-COLA CO/THE 0.5791%
NOVARTIS AG-REG 0.5762%


I mean yeah, if GFC 2.0 hits, obviously values are going to plummet, but your $$$ is diversified over 1,500 companies spread out around the world.

 

But if your capital went down by 50% then wouldn't you only be getting returns on 50%...?

 

BV
I see, in the avatar? where??

 

Not exactly. Dividends and share prices don't go down by the same amount. For example, if the share price dropped by 50%, dividends might only drop 10%. It makes a huge difference if you are investing for returns. Dividend is per share, so if you have 1,000 shares you get the dividend * 1,000. It doesn't matter if the underlying share is worth $1 or 50c.

 

There doesn't have to be any rational correlation between price and dividends.

The price went down by ~50% but the quality of the businesses (that the shares represent) and their operations certainly wasn't reduced by 50%. Telstra (which makes up a large portion of VAS) had it's price slashed during the GFC, its dividend as earnings per share actually increased. Businesses did see their profits slide just not to the extent their valuations were.

When the price dropped by 50% you didn't loose anything unless you sold, you still owned the same number of shares in the same businesses.

 

Ahh ok gotchya! Thanks guys.

 

If dividends stayed the same, your yield has increased