The best opportunities for passive income

Last week, I shared why business acquisition might not be your best bet if passive income is your #1 priority.

But if passive income IS important to you, I‘ve ranked 8 different strategies from most effective to least, with four key criteria:

1. Risk level

2. Time to profitability

3. Scalability

4. Recession resistance

To kick things off:

S Tier (The Best Options)

Index Funds

This is about as close as you can get to “set it and forget it” passive income.

The diversification keeps your risk low, and if the market cooperates, you start making money immediately.

They have excellent scalability, and the more you invest, the greater your returns.

Even when the economy tanks, index funds typically hold up better than individual stocks, making them reasonably recession resistant, too.

Bonds and CDs

These offer very low risk with predictable returns! 

The downside is you'll have to wait through lock-up periods before seeing any profits.

You also can't do much to scale them since they offer fixed returns, but they're incredibly stable during economic downturns as long as the issuer stays solvent.

Despite the scaling limitations, their true passivity makes them a top choice.

A Tier (Solid Choices)

Digital Products

After putting in the initial work to create them, digital products can become genuinely passive income streams.

The upfront financial risk is minimal, and you can start profiting quickly once they're built.

Plus, the scaling potential is massive – build it once, and sell forever.

How well they perform during recessions depends on what you create, but evergreen content tends to stay strong regardless of economic conditions.

As someone who’s done this, I highly recommend them.

Dividend Stocks

These provide cash payouts from individual stocks you own, which makes them riskier than diversified index funds.

Most companies pay quarterly, semi-annually, or once a year, and the scaling potential is solid, especially if you reinvest those dividends back into more shares.

They don't weather economic storms quite as well as index funds, but established dividend-paying companies tend to be fairly resilient.

B Tier (Decent, But Not Truly Passive)

Real Estate Rental Properties

While rental properties carry lower financial risk than some of these other strategies, they're not passive at all.

Unless you're paying a property management company 10% of your rental income to handle everything, owning rentals is essentially a part-time job.

Anyone who actually owns rental properties will tell you this is true.

Affiliate Marketing

This strategy requires skills more than significant capital, so your financial risk stays low…

And you can start making money fairly quickly once you build an audience.

The scaling potential is excellent, and how well it performs during tough economic times depends entirely on what you're promoting.

So where does this fall short?

It's not passive at all.

You're constantly working on content creation, building relationships, and optimizing your approach.

C Tier (Proceed With Caution)

Airbnb

Short-term rentals are riskier than traditional rentals because you're never guaranteed occupancy, and you're competing with every other Airbnb in your area for bookings.

The upside is you can get profitable quickly, and be booking guests within 30 days.

To scale, you’ll need to acquire more properties through loans, cash, or subletting agreements with landlords.

The major weakness is that vacation areas get hit hard during recessions when people start cutting travel from their budgets.

Vending Machines

Location is everything with vending machines, putting them in the moderate risk category.

You can start making money immediately if you find good spots, and scaling is straightforward (just reinvest profits into more machines).

They hold up reasonably well during tough economic times since people still want convenience items.

The catch is they require weekly restocking, making them less passive than they appear.

If you want truly passive income…

Stick to S-tier options. Everything else requires more work than most people expect.

The A and B tier strategies can work, but they‘re not “make money while you sleep” passive.

Now, if you’re willing to put in work to build real wealth, that's where business acquisition comes in.

It's not necessarily as passive as the options in today’s newsletter…

But it's the fastest path I know to making serious money.

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Onward,

— Ben Kelly