How to live on passive income from investment?

Evgeny, please tell me how to live on passive income from investment without dividends? After all, the market happens and falls.

What is passive income

The right question. When we invest in order to accumulate assets that we will give a passive income here everything is simple to understand. We have an investment horizon. We monotonically and boringly investing accumulating capital. But when the time comes when we want no longer to work, but only to live on what our investment needs to be done like everything differently.

Passive income is a type of income, for which active actions are not required. Instead, the source of earnings becomes an asset (money, real estate, etc.), which is owned by human. And we are just here to be interested in our investment portfolio.

And the main rule in investment on the passive — you should have a conservative investment strategy. This means most of the assets should be in instruments with a fixed profitability (bonds, bond funds)

Passive income schedule

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With the question, as I think everything is clear. The usual sale of assets and translation from the brokerage account to your current account in the bank or on the card. But with the question when everything would seem difficult. But I want to please you today, I will tell you that you can shoot money from a brokerage account. Well, of course, not $ 100, it is necessary to still consider the cost of translation and the broker’s commission. But in general, once every 3 months, it is possible to do this every 6 months.

Passive income yield

What kind of yield can be obtained when receiving only passive income. Here let’s turn on the analysis and mathematics. For example, we have a conservative strategy «Currency Deposit» yield in this strategy 9.6% per annum in dollars. But can we count on such a yield every year? Of course not. This is not a bank deposit. And here you have to consider. Turn to the Monte Carlo method.

Simulate Monte Carlo

We take the time interval, from 2004 to 2021. This analysis allowed us to obtain the average annual yield of the portfolio and its volatility (risk). Based on this data, we will generate 10,000 similar portfolios by Monte Carlo, where investments in each would last during 15 years. Simply put, we generate 10,000 options for the behavior of the portfolio, on the basis of how the strategy has shown itself from 2004 to 2021.

And that’s what we see:

✅ With a probability of 90% If you are annually withdrawn 7.3% of your assets, the amount of your portfolio will never decrease. 90% is a good probability, and the yield of 7.3% good yield in dollars.

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And here on these 6% we can count and take them into account when counting your passive income.

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