Passive Income Strategies for Accredited Investors
As a busy, financially successful business owner you’d like a truly passive income strategy for an accredited investor. You have neither the time nor the inclination to buy rental properties or deal with renters and repairs. You’d like a higher return than an index fund, and you don’t want the hassle of running another business or managing more people. You’d also prefer to forgo the constraints of having a physical location to manage. But you still want to diversify your portfolio with a passive investment that easily scales as you grow.
When I sold my last business back in 2018 I was burned out. I was sick of working 70+ hours a week and I didn’t want to deal with employees anymore. I wanted something where I could use my business experience, but on a flexible schedule without a huge time commitment. And I no longer wanted to be responsible for the actions of others. Or be tethered to a physical office location that included inventory, employees and everything else that goes along with a business. Sound familiar?
So I learned how to invest like the professionals. Hedge fund managers like Warren Buffett, Bill Ackman and Glenn Greenberg follow a similar process. That means buying a solid company when it’s trading at a lower price than normal, and then using stock option contracts to reduce the cost basis of owning those companies and build equity in shares before selling them. At a high level, this passive income strategy for accredited investors works like this:
Step 1: We look for a wonderful company that we can understand. We research the company and figure out how much we think it’s worth. We cover:
- How do we know if we can understand the company and what it does?
- How do we know if it’s a good company?
- How do we know if we can trust the company’s management to look out for the owners of the company (the shareholders)?
- How do we know if the big hedge funds are buying or selling shares of the company?
- How do we know when to enter a position in the company?
Step 2: We wait for something to happen that causes the per-share price to drop to what we’re comfortable paying. We learn about the event causing the drop in share price. If we think the company can overcome the event and be a stronger company in the future, we enter a position. We cover what events are and how to recognize events.
Step 3: As the company overcomes the event, the trade price for shares of that company goes back up to where it was trading prior to the event. And we capture that gain.
Step 4: We use stock option contracts to earn monthly passive income on the company before we actually own shares. We also use stock option contracts to generate passive income while we own shares of the company, without actually selling our shares. Stock option contracts enable us to get paid to buy companies that we want to own, at the price we want to own them, when we want to own them. We also use option contracts to sell companies that we want to sell, at the price we want to sell them, when we want to sell them. If any of those things are not true we won’t enter into the option contract.
- What is an option contract?
- How do we earn passive income without owning shares of a company?
- How do we earn passive income from owning a company without selling our shares (and without dividends)?
- How do we get paid to do what we want to do, when we want to do it, at the price we want to do it?
How We Do This
Look over our shoulder as we walk through our passive income strategies for accredited investors each week. We show the steps we take to pick the companies we use for our passive investments. Then we show our weekly trade. That includes why we picked it and how we did it. You’ll get a firsthand look at the steps we use to consistently generate passive income with a low time commitment.