Every passive income vehicle comes with its own set of barriers. One barrier that applies to all vehicles is education. You must know how to drive and maintain the car and how to follow the driving law. Otherwise, you’re in for a rocky ride!
The education level required of each passive income vehicle can be compared. My measurements will be based on the average person. One important factor is: The time it will take the average driver to learn to drive the vehicle being studied. Obviously, it takes longer to learn how to drive a large diesel truck or a formula racing car, then it does to learn how to drive a compact car.
As I compare each passive income vehicle to the others, I will use a 1 to10 scale. 1 is the most difficult to learn and 10 is the easiest to learn. Please keep in mind that just because I rate a vehicle at 10 in comparison to other vehicles, it doesn’t mean it will be very easy to learn. For example, buying a CD from a bank would score higher than collecting royalties from a bestselling book.
One way to accelerate the education process is through a mentor, rather than a guru or salesman. A mentor is someone who has a proven track record with the vehicle.
I have seen gurus and salesman claiming to have a great passive income strategies. In the stock market, gurus try to sell their winning systems. They know how to hedge their positions. The trick they play is placing a trade in one account (Account A) while placing another trade in another account (Account B). When they hedge the trade, the trade in Account A can go up while the trade in Account B goes down at the same rate. For example, they purchase an ETF like SPY in one account and purchased the inverse ETF SH in the other account and they place these trades proportionally to create a no win, no lose situation. Next, they tell you that they can pick the direction of SPY which really has a 50% chance of going higher and a 50% of going lower. (Actually is 53% to go higher and 47% to go lower due to market drift, but let’s not get to technical). The results they show you seem to indicate a huge winner because SPY went higher as they previously predicted, but you only see Account A. You never see that Account B is down by the same amount. In reality, they didn’t make any money. You never know this because you never see the full picture.
You can’t see the complete picture without seeing the whole portfolio. You won’t get the information you need if all you see is a trade here and there. In addition, you must be able to see a portfolio traded with real money in real time. A mentor will give you access to all of this information. A guru or salesman will give you broken bits and pieces. A true trading mentor is hard to find and may offer you bits and pieces at first but in the end will offer full portfolio transparency in real time with real money.
Bottom Line: A mentor with a proven record can accelerate the learning process considerably. When I rate the educational requirement of each passive income vehicle, I will break it down into two categories: One with a mentor and the other without a mentor. For example a vehicle may rank very low without a mentor but rank extremely high with a mentor.