In today’s fast-paced world, creating a passive income strategy has become a desirable goal for many individuals. The idea of generating a steady stream of income with minimal effort is undeniably appealing. However, building a successful passive income strategy requires careful planning, dedication, and a willingness to adapt to changing market dynamics. In this article, we will explore the essential steps to help you create a passive income strategy that has the potential to generate sustainable and reliable income in the long run.

If you're looking for a trusted source to help you stay on top of the ever-changing financial world of investing, retirement and estate planning, and asset protection, whether it's for you and your family or your small business, you're in the right place. This is the 1715 Treasure Coast Financial Wellness Podcast, where we'll keep you up to speed with the latest market news and conditions every week. Now here's your host, Thomas Davies. Well, hello, and welcome to another edition, the casual edition of the 1715 Treasure Coast Financial Wellness Podcast.

My name is Thomas Davies. I'm a wealth advisor here in Stewart, Florida. And welcome. A lot of things to talk about this week.

Busy week in the markets, and couldn't mention, failed to mention the heat. Man, it's hot. Hopefully, you're able to get out of the heat, and it's certainly affecting everyone around the country. Stay safe out there and stay hydrated, because it is hot.

And hopefully, we'll get a break here. Certainly in Florida, it's been in the high 90s, mid 90s, and man, it's hot. But anyway, hopefully, you're staying hydrated and staying safe. So something in the news today, Meta's Threads has hit 70 million sign-ups, Mark Zuckerberg says.

Well, we're on Threads here, and it's interesting, haven't had a chance really to play with it too much, but this is direct competition to Twitter. It looks a lot like it, but tell me what your thoughts are. So far, it's pretty interesting, haven't had a chance really to play with it too much, but it's certainly going to be interesting and see how the competition to Twitter heats up. Another social media channel that we're all going to have to be on, right?

This one is pretty seamless through Instagram, and does Mark Zuckerberg have another hit on his hands? Something to talk about this week, CDs. CDs are paying 5%, maybe more than 5%, depending on what bank, and it's great. As interest rates has risen, and I've mentioned this in the past, but don't put all your money in there.

CDs are not for long-term investing. You want to make sure that we talk about diversification and different assets in different places. Although that 5% is certainly appealing, just so you know that generally the stock market returns anywhere from 6.5% to 7% on average historically. So you want to make sure that you're not using CDs as a long-term investment strategy.

Yes, it's safe, and it certainly is appealing at 5%, but once again, you just don't want to use that for everything that you have going into one place. Next week, all-important CPI next week. This week certainly was affected by the comments about possibly raising interest rates more. How many more interest rate raises can the economy hold and take before it breaks?

I think that's the big question. Most economists say that we could probably absorb another one or two, maybe even three interest rate raises, but certainly we're getting to that tilting point that most people feel that if they go above and beyond that, that they're just going to crash the economy and the local banks. So we'll see. We'll see what the numbers say next week.

We'll talk about it on next week's podcast. Those inflation numbers, if they come in hot and it's not in the declining fashion, which they like, we could be talking another 50 basis points raise. Certainly the employment numbers set everything on fire this week and certainly made for a mess trading yesterday for sure. You know, the depressed sentiment in the outlook right now in the economy is that we're looking at an imminent recession.

Is it a soft landing? Is it a hard landing? Boy, it seems like we've been talking about this for a year or more, this recession. When is it going to come?

Are we already in it? You know, it's what do you do? You know, so the questions are you have asset allocation. You be prepared.

You know, I've talked about this in many of the episodes, having your assets diversified into different places and working in different areas. Certainly right now with the corporate bond market, corporate bond market paying, you know, anywhere from four, five, six, 7% going up on the risk scale. And certainly those are some places that you might be able to hide. It didn't work last year as both stocks and bonds both went down.

So you know, you really got to look at your risk out there and say, okay, if this recession is coming, is my business recession proof? How much of an income hit am I going to take in my business if business starts to slow down? So those are things that you certainly want to look at. What's ahead of the U.S.

economy? Is it recession? Is it more inflation? Are we in deflation?

You know, it's certainly some of the great questions to ask and unfortunately only time will tell to see what kind of damage has been done. Certainly commercial real estate is feeling the headwinds with the credit conditions, income pressure, and elevated refinancing needs over the next two years. I think I mentioned last week on the podcast that Morgan Stanley came out and said that commercial real estate is going to be hit harder than it was in 2008. So that is kind of a scary outlook there as, you know, the work from home and one of the things that I always watch is credit.

So those are some things that are happening right now. This is an interesting stat I thought I would share that by a Goldman Sachs study come out saying that by cutting the gender employment gap in half could boost the global GDP by 6%. 6%. I mean, that's a lot.

You know, certainly that gender gap in this country and other countries, you know, it's gotten better but there's definitely a lot of room for improvement and that's another debate for another time. But it certainly needs improvement and I can only tell you that most studies that I've read that have women in the boardroom generally do better. So 6% is a lot from global GDP. Goldman Sachs come out and said why U.S.

stocks may rally more than expected this year. They believe that the rally may have room to run. They feel that there is more room here towards the end of the year. We've had a pretty good run so far.

It will be interesting to see how much further the market can run from here. So one of the things this week, the topic this week is passive income. It's a topic that came up this week and I thought I would talk about it a little bit and as most people get into retirement or are in retirement, you know, that income stream has stopped and how do you replace it? And how do you replace it in a passive manner since you've stopped working?

And so I thought this was a great question. So there are many ways to create passive income starting with real estate, the stock market, peer-to-peer lending, a little sketchy there, e-commerce, boy, you go on YouTube or any of the social media and you type in passive income and it's just there's all sorts of stuff from creating e-books to selling stuff on Amazon, you know, and then maybe that's something that you would like to do, you know, in your time, you know, like I said, with the digital products and some of the e-commerce. But for me here at Davies Wealth Management, we're going to focus pretty much on dividend type paying stocks, bonds, mutual funds, ETFs, and any type of investment that's really going to create income into the portfolio. You know, because in today's fast-paced world, creative passive income strategy has to be a desirable goal for many individuals.

The idea of generating a steady stream of income with minimal effort is undeniably appealing. How great is it to be able to, you know, set everything up and just have it generate income? However, building a successful passive income strategy requires careful planning, dedication, and willingness to adapt to changing market dynamics. You know, this is something that I put in an article out today on passive income and some steps to do that.

So we'll talk about that. What are the steps? So the first step you have to do is define your goal and identify your passions. You know, this passive income journey is vital to identify your financial goals and align them with your passions.

You know, and we're going to talk about here in this podcast, you know, if you have a passion for the stock market and investments, you know, we're going to talk about that. I'm not going to go too much into some of the other things that are out there as mentioned, whether it be selling stuff on Amazon, creating eBooks, selling online, and, you know, in real estate. When it comes to real estate, I like the real estate investment trusts. They generally produce a nice income stream, anywhere from eight to 10 plus percent.

But you are going to put your principal at risk. And that's ultimately what it is. I'd like to joke and say that John Wayne's famous saying when it came to investing was, I don't care about my return on principal more than my return of principal. And so that's what we're going to talk about.

You want to make sure you research step number two, the right passive income streams. And I just talked about all them, real estate, so on and so forth, stock market, online. And you know, so you want to research everything when you're doing that. Build and nurture your passive income assets.

You know, so if you are building an income portfolio, how do you do that? And I'm going to kind of stop on the steps right here and talk about how you build a passive income portfolio. And there's a lot of ways you can do that, whether that be corporate bonds, municipal bonds, maybe you pay a lot of taxes or you have a lot of tax issues. Municipal bonds can certainly subside a lot of the tax strategies that are out there as far as receiving tax-free income.

You know, but munis and corporates are certainly one of the ways to go. There are a lot of ETF, exchange traded funds out there. Maybe you don't have the time to pick individual bonds and sort through all the different listings and the different rating agencies and, you know, are they investment grade, are they non-investment grade, are they stable, are they negative? Whatever the rating agencies has rated them, maybe you don't have the time to do that and you can look into an exchange traded fund that has a basket of those different types of municipal bonds or corporate bonds in an ETF strategy.

And depending on what they yield. Now the investment grade, you have the high yield, you have, you know, which is more risk. Obviously the lower yield, the safer they are, whether they go from a triple A rating being the best, down to triple B, so on and so forth, down to the C ratings and we won't talk about ratings below that. You know, but it's also risk in the portfolio and how much you want to put into risk inside your portfolio.

Other than that, you can also look at some different mutual funds. They're basically the same as an ETF. They're going to do the work for you. They're going to look at all the individual bonds and, you know, go through the ratings and you can basically pick that mutual fund or ETF based on the ratings that are inside the underlying portfolio because you're going to do the homework like you normally do and you're going to look and see what's inside that portfolio held.

Now they're also dividend paying stocks. There's a lot of stocks out there that will pay dividends anywhere from 0.25%, which doesn't do you any good, upwards of 7, 8%. You know, there's a few out there right now, AT&T and Verizon are up in that 7 plus percent range, but if you look at their track history over the last five years, your principal has been at risk. It's actually declined over the last five years, not by much, but certainly you're paying for that dividend and can those dividends be sustainable?

That's one of the ways that you can look is with dividend paying stocks, add some ETFs, maybe even some mutual funds. There are some higher yielding stocks, but I will warn that the higher the yield you get in some of these individual stocks, the higher the risk you're going to put your principal at risk. So those are some things to think about. I've mentioned real estate investment trusts.

That is another way in the stock market that you can do this is by adding those REITs into your portfolio and they usually are generally a little higher yielding, depending on what the underlying REIT holds in its portfolio. Something else we can talk about too is annuities and annuities can be a completely separate podcast and we're just talking about income today and passive income and there are many annuities out there that have income strategies that will pay you for life and basically how that works out is you use up your principal first and you outlive, you'd get paid the income stream to the end of your life and based upon how much premium you put up is depending on how much you will get back in income and for some people that's great. They have an immediate annuity, there's variable annuities, there's fixed index annuities, there's all types of annuities that can create that passive income and so those are some things that you also want to look at are the annuities and so with that, those are a few things that you certainly want to look into in the public markets that are available for passive income. That's a few ideas, hopefully you can run with those.

Once again, if you have questions on anything directly, please give me a call. My number will be in the YouTube and also at the end of the podcast and like I said, hopefully that gives you a couple ideas. It's really depending upon your risk and your risk tolerance and how much you're willing to put that money at risk for the income. It's gotten better these days with interest rates being raised and if they do raise interest rates again, the fixed income market will actually give you better higher yields.

The unfortunate part is that you just can't have your cake and eat it too, meaning you can't have all the income and then have all the growth. There is a trade-off and generally the higher the income, the lower the growth. It's just generally a trade-off there. It's not always that way, but certainly it can be the trade-off that really is the deciding factor in risk.

Do I want a little more income? Do I want a little more growth? Sometimes you have to decide which is more important, that income or growth. I've talked about in the past that growth and income, as you age, you get more income than you do growth, whereas when you're younger, it's all about growing your assets, not so much about income, but once again that income stream gets turned off and you just got to figure out how to do that.

With all that being said, you have to have a budget. You have to understand how much money it is that you need. Even if you have more than enough, you still have to have a basic understanding of how much you're spending on a yearly basis. By having a budget, and it can be a simple budget, it doesn't have to be complex, but just an idea of what your income needs are.

Sometimes a lot of people will come in and say, I need income out of my portfolio. How much income do you need will also dictate how much risk you need to take inside your portfolio, depending on how much money you have also. You want to set those goals and needs inside that portfolio, along with your income as part of your needs. That's going to be it this week.

That's the casual edition of the 1715 Treasure Coast Financial Wellness Podcast. Once again, my name is Thomas Davies. I'm a wealth advisor here in Stewart, Florida. I hope you have a great weekend, and I am out.

Thank you for listening to the 1715 Treasure Coast Financial Wellness Podcast. If you enjoyed this episode, share it with a friend who might like it, and please rate, comment, and subscribe. If you'd like to contact us, find more information, or if you'd like to keep up with us on Facebook, Instagram, Twitter, or LinkedIn, check out our website at www.tdwealth.net. Have a great day, and we'll talk to you next week.