The Finatical
Week of March 29th, 2022 - Active to Passive Income, CMOS Guiding The Future of Financial Services, The Digital Transformation in Finance Trading
Topic Breakdown - Active vs Passive Income
Earning a high income is the goal of many, but a lot of people lack knowledge of passive income. Along with active income, utilizing passive income can assist you in creating financial stability in the future. Also, because passively earned income is not restricted by your time and energy, it may have a considerable positive impact on your potential to accumulate wealth over time.
An Introduction
So, what are these two types of incomes, and what is the difference between passive and active income? Active income is essentially the salary that you earn from services, such as your job, or fees that you charge. This is the type of income that most people are already familiar with. Wages, salaries, bonuses, commissions, tips, and net profits (from self-employment) are all examples of active income. Passive income, meanwhile, is defined as revenue that takes almost no effort to obtain and sustain. Examples of passive income include investing in dividend stocks, a REIT (Real Estate Investment Trust), rental properties, or high yield savings accounts.
The Importance
There are many reasons why one might want to generate passive income. People who want to retire early would be wise to do this, as just earning the income from your job simply might not be enough. With passive income, you may be able to satisfy your requirements, as well as a few of your wants. Your ambitions might become a reality if you begin to imagine broader than the money that comes with your day-to-day employment. Passive income can also allow you to increase your wealth, as well as protect you from a complete loss of income if you lose your job. It can even be used to generate money that you can spend on your wants, while your salary pays for your needs.
Two Ways to Earn Passive Income
Now that the importance of earning passive income has been established, you may be wondering how to go about doing so. In this article, we will be going over the two most common and effective ways to earn passive income, although, it is important to keep in mind that there are numerous other ways to generate this form of revenue. The first way to gain passive income is by investing in dividend stocks. Do some research and find stocks that have low volatility and consistent growth history. The important part is to make sure that the stock you want to invest in also pays a large dividend to the investors. A dividend is a payment made to a company's shareholders in the form of cash or shares of the stock. Dividends are often paid from a company's retained earnings. For example, if you invest in a dividend stock, you would periodically get that large dividend in the form of cash or stock, which can then be used, or reinvested to generate compound interest over time. The issue with this method, however, is that to gain a large amount of money from dividends, you would have to invest a lot of money in that stock. This is why it is important to continuously invest over time and build up the amount of stock you own. Another way to earn passive income is by renting out properties. If you own a property that you do not frequently use, or if you have a spare room in your house, you could potentially be making money by renting it out. Typically, creating passive income in real estate entails purchasing a property and renting it out, as managing rental properties may be a lucrative source of income. If you do not have space in your house to rent out, and no second property, you could save enough money for the downpayment on an inexpensive accommodation. The payments on this property could then be paid for by the money earned from the renters, and you could consider it a real estate investment due to your ownership of the property, while potentially making passive income from the rent.
In conclusion, the concept of passive income is essential to learn for those who are interested in having financial stability, retiring early, or just building more wealth. Almost anyone can earn at least a small stream of passive income through numerous methods and would surely benefit from utilizing both active and passive income.
Financial Trends
Chief Marketing Officers Guiding The Future of Financial Services
Currently, companies are competing with each other to be able to keep up with the pace of innovations occurring in technology. AI is allowing everything to be autonomous, whether it is for services that companies offer to their clients or self-driving vehicles. Chief Marketing Officers at leading financial institutions have been able to take on this challenge by focusing on better collaboration, emphasizing customer experience, and capabilities in change management. This has allowed CMOs to position themselves and their companies investing in the future of financial services. CMOs have discovered that the most effective way for their company to ensure positive outcomes is through thorough collaboration within the company for inventing new ways to take advantage of developing technologies.
CMOs that primarily work in the financial services sector have expanded their thinking as they are no longer solely focused on sending mass messages through marketing campaigns. Now, they have to start to become more responsible for advocating for their customers' needs and wants, as customers are the driving force for every business. With the development in technology, marketing organizations now require access to real-time processing resources, along with being able to use data in creative ways. This requires CMOs having the capability of conveying the importance of making data-driven decisions to the rest of their executive team to optimize their profit and results.
The Digital Transformation in Finance Trading
Due to pandemic, finance trading around the world is facing a period of uncertainty due to the nonstop trade tensions, market volatility. Hence, banks that are responsible for facilitating international trade are becoming aware of the importance of using digital transformation tools and the benefits that it will provide for these banks. Despite digital transformations taking over the banking industry, banks that are responsible for facilitating international trade are desperate for finding more efficient ways to compute their finance functions quickly. The main reason as to why the banking industry has slowly started to shift towards digital transformation from traditional bank institutions is its heavy reliance on paper.
Although there are other alternatives present for finance trading, the services that finance trading provides to exporters and importers still have the necessity of documenting millions of transactions every year. For banks to use digital transformation to complete these transactions, they need to start using innovative designs and customer experience solutions. Banks have started to recognize that they have the need to improve their operational processes for providing better customer experience, reducing costs, and facilitating secure global trade policies. The banking industry realized that by redesigning their trade finance ecosystem, it would have a better knowledge on its data, platforms and processes, resulting in banks preventing financial crime and building trust with their customers.
Financial Guidance
"Know what you own, and know why you own it." - Peter Lynch
It’s important to not only understand the assets which you own, but to also understand why you decided to take ownership of said assets. This knowledge will help you be secure in your financial decisions, and contribute to your overall success as an investor.
Money Fact
The relative rarity of $2 bills means that people often consider them to be a lucky charm of sorts. However, that has not been the case throughout history, as people have often considered them to be unlucky.