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Ask HN: Best Passive Income Method?
51–60 of 75 posts
Re: Ask HN: Best Passive Income Method?
#52I 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…
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).
Re: Ask HN: Best Passive Income Method?
#53SP 500 ETF
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…
> 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.
Re: Ask HN: Best Passive Income Method?
#54I 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…
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...
Re: Ask HN: Best Passive Income Method?
#55My 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.
Re: Ask HN: Best Passive Income Method?
#56I 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…
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…
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.
Re: Ask HN: Best Passive Income Method?
#57SP 500 ETF
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.
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?
Re: Ask HN: Best Passive Income Method?
#58Earlier quoted context omitted.
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.
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…
I agree with all of this, but think it applies equally to trying to start a SaaS business. So, given little direction or ideas on a SaaS project vs. a game idea they have some interest in, I'd still vote for the game idea.
Re: Ask HN: Best Passive Income Method?
#59Saas 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.
Re: Ask HN: Best Passive Income Method?
#60SP 500 ETF
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.
> 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.