Buzz
Passive income is the earnings derived from property rentals, the exploitation of assets like music copyrights, and intellectual property. However, this perspective is from the U.S., whereas...
Many professions and business types have been tagged with the 4 letters 'passive income,' aiming at our 'do less, earn more' mindset, steering us towards their goals.
Table of Contents:
Creating Value is the Key to Making Money
What is Passive Income?
Passive income, translated from English, is Passive Income. The U.S. and some other countries define passive income as the income we receive without needing or using much of our labor. Specifically, passive income is income from renting real estate, from exploiting assets like music copyrights, intellectual property... The U.S. and some countries apply favorable tax rates to these passive income sources.
However, the term passive income has been 'marketized,' becoming a trendy phrase with a completely different meaning than the basic definition. If you search for the keyword 'Automated Income' on search engines like Google, you'll find titles like: '7 Ways to Earn Passive Income to Get Rich Quick Beyond Imagination,' '19 ways to earn money passively even while sleeping,' 'Don't think about getting rich if you don't know how to create passive income'...
Is Multi-Level Marketing a Source of Passive Income?
Many multi-level marketing companies recruit customers/distributors with the message: You don't need to do much, just use this product (advertised as very good, superior), introduce it to everyone, and money will flow into your pocket, completely passive.
In reality, multi-level marketing is not passive, not that easy.
Only the top 1%-5% of dedicated MLM professionals tirelessly invite customers, essentially recruiting downlines, encouraging downlines to use the product in sufficient quantities, encouraging downlines to recruit even lower... with a system of enough people and using it in sufficient quantities to achieve a worthwhile income from this profession.
For the majority, 50%-80%, earnings are very low. The bottom 10%-20% may even incur losses due to buying products at excessively high prices. Some high-priced products, considered the secret weapon of some MLM companies in Vietnam, have been sued in the U.S. and proven to contain components similar to products sold in supermarkets at only 30% – 40% of the MLM product's price.
Multi-level marketing essentially turns customers into distributors, providing business opportunities for those in need of the product. Whether it's legal or illegal, good or distorted, depends on the implementation of that specific MLM company. But one thing is certain: Multi-level marketing is active income, not passive income. It requires specialists to use the product, continuously recruit, build a system, and encourage the system to use the product.
Is Affiliate Marketing a Source of Passive Income?
In this Internet age, participating in affiliate marketing—promoting the sales links of products and services to customers, acquaintances, and your database, and earning a commission when they purchase—is an interesting way to make money. Some people focus 100% of their time on affiliate marketing and make a living, even getting rich. Others see it as a part-time money-making job.
However, this is not a profession with passive income. We can only earn stable income from this job when we are either influencers (KOL) or experts in the industry. Customers will visit our Facebook, blog, or website to read articles and purchase products/services based on our recommendations. Alternatively, if we excel and invest in online marketing, we can reach a large target audience. These activities require us to invest in knowledge, effort, and capital. Affiliate marketing is not a profession with passive income.
About 6-7 years ago, there was an expert who claimed to be the 'king' of Affiliate Marketing. He wrote books and created a website, telling a story like this: after trying every profession and facing unsuccessful startups, he decided to do Affiliate Marketing. After many difficulties and using his last credit card, money started coming in. He earned millions of dollars and cheered for affiliate marketing as a profession with enormous passive income.
Later, people found out that he was good at storytelling. His purpose was to sell books and promote affiliate links to sell tools to interested people, such as domain, email marketing, and other tools. Unfortunately, those who blindly believed and bought books and tools according to his guidance just waited for money to come in passively, but it never did.
Passive income from websites/apps paying shoppers?
Some Web/Apps collaborate with platforms and shops to refund a portion of the money to customers, ranging from 3%-10% of the amount spent. This is a way to reward and encourage customers to shop through that Web/App. This method creates value for all parties involved and should be promoted.
However, some advertising Web/Apps promise to refund customers up to 70%, 80%, or even 100% of the amount they spent on products/services. Advertising in this way is considered passive income.
This could be a strategy for some businesses to quickly build a customer base at a relatively high cost. However, it can also be a method for some businesses to mobilize funds. Instead of returning money, they offer points to encourage customer consumption and, at the same time, delay the cash flow return to customers.
The most dangerous situation occurs when a business spends more than it earns, using the money from new customers to pay back the previous ones. In such cases, the system is extremely risky, and if the rate of new buyers decreases, the system will collapse immediately. We should absolutely avoid participating in these models and not believe in their 4 words: 'passive income'.
Passive income from collaborative investment projects?
Real estate models like 'Vacation Rentals' and 'Prefab house rental – construction – leasing,' forms of 'delegated investment' in derivative securities, foreign securities, forex, delegated funds... boast high annual returns of 30% - 100%. They often use advertising tricks like 'Just invest capital. Our professional team will manage and make money for you. You don't have to worry about anything. Money will generate itself with an interest rate of X%, several times that of the bank.'
These models will eventually collapse.
If we have knowledge of the industry, we should ask them how they operate and what business methods they use to achieve such high profit rates. They will avoid direct answers and may use high-tech, modern terms like AI, 4.0 to intimidate us. In reality, they cannot explain such high profit rates without risks.
If we are not familiar with the industry, just ask them this question. 'Why doesn't the company borrow from banks, call in billionaires, or investment funds? Just with over 15% per year, banks, funds, and billionaires would join immediately. The project's profit rate of 40%, 60% is excellent. Why not invite them quickly, instead of inviting me?' Or 'If I borrow at 15% and invest in the project, I enjoy the difference without risk, right? Are you inviting me to get rich for free?'
These projects violate the principle 'There is never a free lunch.' They are not a source of passive income and have all three main risks: capital loss risk, risk of not achieving profit rate, liquidity risk.
Don't dream of getting rich through passive income
Searching on Google, we will find many professions and business models advertised as passive income, such as becoming a YouTuber, selling on Amazon and eBay, Dropshipping, creating an app, Bitcoin mining, Poker playing, Peer-to-peer lending, building a self-operating business...
These professions and business models are not truly a source of passive income. They demand our labor, they demand our understanding, they demand us to accept risks. Believing in these advertisements, we will waste time, waste our money, and especially indulge in unrealistic dreams. Wasting time, opportunities, and daydreaming about 'getting rich quick without working' are the biggest losses for these individuals. In reality, the idea of 'Passive income, doing nothing, just sleeping and still making money' can only happen for the rich kids who are being 'spoiled' by their parents, not for those striving to make their own money.
For the rest of us who want to make money, we must create value. And we can only do that through one or more of the following: Labor, time, attitude, intelligence, ideas, capital... Among them, the attitude towards money and towards oneself is the most important.
Posted by: Tài Trương
Keywords: Passive Income: Please don't dream
