In the other thread I said id cover some questions for a 10k post. Well now I answer them. Im going to start off by answering the financial management questions and then the rest since the finance part generated the most interest.
what are the best ways to increase passive income?
Passive income is income you dont have to work for (for those who didnt know). Meaning, while you sit on your ass, you make money. Poker is not passive income.
There are only a limited number of ways to make truly passive income as far as I know. These are primarily investing in index funds and buying guaranteed securities such a GIC, bonds, and such. Real Estate is not always passive income although it can be. Often real estate requires constant supervision. These include finding tenants, handling tenants complains, going over paper work and such. While there are companies set up to manage property for you (property managers), they charge for this service. As well, im not even convinced that real estate is a better investment that the stock market. This article
]http://ezinearticles.com/?Returns-on-Real-Estate-vs.-Stock-Market&id=639801[/url] explains that real estate returned 12% from the period 1926-current while stocks returned 11% in the same period (standard cera used for long term comparions in finance). Like any investment however, carefully selected investments can see you outperforming the averages. By the same token, a poorly selected property can under preform the market. Given that, I feel real estate uses too much of your capital in one security to make me feel safe. Diversification is extremely important when talking about your net worth and while it is extremely easy to accomplish that in stocks, it is much harder in real estate. As well there are liquidity issues. And other issues. The point being that real estate is not necessarily a good idea despite what your uncle may tell you.
Passive income is not the way to make the most out of your money however, as active management in the stock market can earn you significantly higher than average returns. This is very difficult to do however, and is not recommended for 99% of investors. The reasons are numerous but the most important is the time required to do "your homework" thoroughly.
This brings us to index investing and ETFs (exchange traded finds). Index investing recognizes the fact that most actively management mutual funds fail to beat the market long term. I cant link any specific paper off the top of my head but do a quick google search and you will see that this is true. The reason the mutual funds cannot beat the averages despite being run by very smart people who spend their days doing research is primarily because of the way the business is set up. This is explained a bit more in "the intelligent investor" , a great book on investing and the mentality required to invest successfully. I recommend it to everyone.
Since mutual funds charge a significant fee every year for managing your money, and they often cannot provide above average returns, what are you paying for? Nothing really. Therefore the trend these days is to move your money over into index funds which work by copying the distribution of the dow, SP 500, nasdaq, ect. This means your results will mirror those indices. Of course, now they have hundred of ETFs so incase you want to buy semconductors because you are bullish on the industry, you can buy the semiconductor ETF which is a representative portfolio of all semiconductor stocks. Here is a thread that explains how you should set up your portfolio by buying only
ETFs. I suggest most People read that and follow the advice.
Now all that talk is not to say that its impossible to beat the market. People do, and their results are not fluke. They have the ability to pick winning companies and can earn their clients very high yearly returns consistently. Najord Defense found a very good paper on that subject, which he writes about
here
To sum up, the majority of people should allocate their money in the stock market using the ETF guide above or some variation based on it. However if you find opportunities that can present better than average returns then you should pursue them. However the majority of people should not.