How Low Interest Rates Increase The Value Of Income Producing Assets

Multiple Streams Of IncomeThere was surprisingly little debate regarding my passive income investment rankings. Figuring out the five factor scores for each of the seven investments took about 10 hours to produce, so perhaps I was thorough enough to address all the points. Everybody agreed that dividend investing is one of the best ways to generate passive income. The two main investments that had the most discussion were Real Estate and Creating Your Own Product.

The pushback on real estate investing is that it feels too much like work. When you’re trying to find the perfect tenant and keep up with property taxes, real estate can feel like a bear. Meanwhile, nobody disagreed with Creating Your Own Product as being a top passive income generating asset. However, I just didn’t get the sense that anybody really got motivated to start creating something.

In this short post, I want to demonstrate via some charts and logical reasoning the power of purchasing rental property and creating a product.

Ranking The Best Passive Income Investments

Passive Income Streams Allows You To Be Free

In order to relax, you must first work very, very hard!

After about the 30th day in a row of working 12+ hour days and eating rubber chicken dinners at the free cafeteria down at 85 Broad Street, I decided I had enough. There was no way I could last for more than five years working in a pressure cooker environment like Wall Street. I became obsessed with generating passive income starting in 1999.

We’ve discussed how to get started building passive income for financial freedom in a previous post. Now I’d like to rank the various passive income streams based on risk, return, and feasibility. The rankings are somewhat subjective, but they are born from my own real life experiences attempting to generate multiple types of passive income sources over the past 16 years.

The passive income journey is a long one. But thanks to innovation and technology, the ability to generate meaningful passive income is accelerating!

Should I Invest In P2P Lending? Prosper Performance Review

live-long-and-prosperAt long last, Lending Club went public recently with an estimated $5 billion market cap. It’s the first really big new generation fintech IPO, and boy is it going to make a lot of people a lot of money. To give you some perspective, at a $5 billion market cap, Lending Club is ~$1.3 billion larger than Yelp! I’ve been following both Lending Club and Prosper since their inception as their offices were right next to mine in downtown San Francisco.

In 2013, I finally decided to invest some money into P2P lending with Prosper to see what the fuss was all about. I had a friend working at Prosper at the time who helped teach me about the market place and the company over several lunches. I’ve written a post on tips for P2P borrowers from a lender’s perspective, a post highlighting the P2P lending returns by borrower rating and credit score, and how P2P lending can even get a little addictive due to the ability to pick and choose who gets to borrow your money.

I was relatively gung ho about allocating several hundred thousand dollars to P2P lending, but I didn’t because I still wanted to do more research given I expected rates to stay low and the stock market to outperform as a result. I also ended up buying another house, so I only invested several thousand in P2P lending as a result, and basically ignored the account for much of the year until now.

MY EXPERIENCE WITH PROSPER ALMOST TWO YEARS IN

Here’s a snapshot of my current performance: Prosper Annualized Return

A 7.43% overall return isn’t too shabby for 2014 given the stock market has returned about ~9% over the same period. I’m a very conservative investor with P2P lending since it’s only been about two years of actual investing. As a result, I pretty much invested in A and AA Prosper Rating borrowers along with several B Ratings to get some juice.

How I Earn Over 10% Passive Income With P2P Lending

Stack of money cash

Want some cash money?

The following is a guest post from my friend Jeremy Johnson who was kind enough to help me out with a random WordPress question issue when I first started back in 2009. I’m pleased to say he jumped head first into P2P lending when we spoke a couple years ago about diversifying his savings, and is doing well. 

Peer to peer lending is one of the most simple and effective ways I’ve ever found to make passive income. It has outperformed my stock picks, selling old baseball cards, my own business ideas – everything. I’ve earned more money through it than I’ve earned at anything else except my day job. This is pretty powerful for me. I’ll share a walkthrough of how this works for me and you can use/adjust for yourself.

Should I Invest In Oil Stocks? Learn About Oil Price Fundamentals First

Oil price collapseOil is a popular topic due to its surprising ~50% price drop from June 2014 to mid-2015. Nobody could have imagined such a quick collapse in oil. I certainly didn’t when I decided to buy a Honda Fit instead of a Jeep Grand Cherokee Limited last summer! If I had known I could pump my rolling 4th bedroom for less than $2.90 a gallon, I might very well have opted for the bigger car.

Given knowing what the hell is going on in the world is part of being a functioning citizen in today’s society, I decided to do some research into what happened. After all, I did purchase the oil ETF USO, a couple major integrated oil companies, an airline stock, and some auto stocks in my newest diversified investment portfolio for 2015 to try and make some money.

So what caused this significant drop, and how does this affect businesses, the economy, and our everyday lives? Is oil poised to rise once again? Let’s explore these questions and more.

The Startup Journey: Alternative Investing With Sliced Investing Founders

Founders of Sliced Investing. Top: Akhil Lodha. Bottom: Mike Furlong

Top: Akhil Lodha. Bottom: Mike Furlong

One goal after leaving my corporate job of 11 years in 2012 was to learn more about the startup industry in Silicon Valley. I was coming from the old school finance industry where there was relatively little innovation compared to many financial technology companies today. Life was getting a little boring and I kept watching company after company we took public grow into great successes.

One of those companies was Google. I remember being excited seeing Sergei Brin, one of Google’s founders give a lunch presentation in downtown San Francisco during their IPO roadshow back in August, 2004. It was standing room only, so I wasn’t able to eat one of the manufactured plates of rubber chicken. We were one of the lead book runners, and I was inspired at how quickly Sergei, Larry and team were able to build something so huge, so quickly.

We are living in the golden age of tech/internet innovation. Five years ago, at age 32, I told myself that if I didn’t create something internet-related on my own or join a startup while having so much access living in San Francisco, I would kick myself in the face when I’m old.

Today, Google is one of my largest sources of traffic and revenue for Financial Samurai. Maybe it’s good karma for helping them go public, even though the IPO seemed shaky at the time with the last minute price decision of $85/share. Yes, we all should have piled in back then! It’s crazy how life comes full circle.

I discovered Sliced Investing on AngelList while vacationing up in Tahoe over Christmas break. With my tag-line “Slicing Through Money’s Mysteries,” I wondered if destiny was calling once again as I shot the founders a note to say I’m interested in helping them out. They kindly responded, and here I am.

I wrote off hedge fund investing until 2015 because I didn’t have the $500,000+ minimums to invest. It was just as well since the markets have been on fire since 2009 and hedge funds have underperformed. But in a way, I have been creating my own equity hedged portfolio with my accumulation of structured products since 2012. Give me 5-10% returns every year with low volatility, and I’ll happily invest all I can.

Sliced Investing smartly crowd-sources investor capital in order to make investing in hedge funds and alternatives more accessible to more people due to their minimum investment of $20,000. With the bull market entering its sixth year, I’m beginning to wonder how much more this baby can run. I’ll take under a 10% return for the S&P 500 for 2015 if anybody wants to take the other side of the bet!

In this interview, I want to understand the mindset of an entrepreneur. We’ll talk about risk-taking, the why, and how things came to be with Mike Furlong and Akhil Lodha, founders of Sliced Investing. I’ve got to imagine many people would love to be their own bosses and create a company one day as well. 

Should I Buy Bonds? Wealthy People Don’t

Stocks and James Bond 007 by Marc Tavenier

Stocks and James Bond

Wealthier people in America do not follow the conventional asset allocation model of buying bonds, i.e. age equals your bond percentage allocation or a 60/40 equities/fixed income split. How do I know this? Personal Capital has over 800,000 users of their free financial dashboard to help manage your money and I’m a consultant who is privy to some of their data to share with all of you. Data geeks, rejoice!

Out of 800,000+ Personal Capital financial dashboard users, roughly 165,000 of them have linked investable assets of between $100,000 to $2 million. We call this the mass affluent class, or upper middle class if you’re so inclined. The mass affluent are generally regular folks with mainly W2 income. They save and invest in order to provide for their family, pay for expensive tuition bills, take a couple nice vacations a year, and hopefully achieve a comfortable retirement when all is said and done.

Let’s do a quick review of my proposed stocks and bonds asset allocation model before moving on to the big data.