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Comment by bob1029 | Hacker News Reader

To me, passive means little or no ongoing time investment. If we are looking at "best" in terms of revenue, then dividends from investing in the stock market are by far the best source of passive income I can imagine.

I've got a 1.5x leveraged portfolio over on IBKR that is currently yielding ~2.9% dividends across a wide range of sectors. I am paying ~1% in margin fees at the moment, so I basically get to use their money for "free" on the growth side (of which there is plenty right now). It is turning into quite the comfortable safety blanket.

I almost feel like this is not in the spirit of the topic posed here because of how mundane and uninteresting stock investments are, relatively speaking. I am far more interested in reading through all of the tales of crazy side projects that have turned into something more.

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I looked into this (and even implemented it for a time) but by every analysis it was better to ignore dividends and instead focus on total return. If you want monthly income, just draw down the assets monthly.

By the way, this is called a carry trade. If you’re using a lot of leverage for small interest (1.9%) returns, it can seem like free money until it blows up in volatile times and results in huge losses. So anyone considering this should keep an eye on risk.

I agree with this position - I am not running a pure value-oriented portfolio. It is very nearly a 50/50 blend between value/growth at the moment. Only ~25% of my portfolio represents investments explicitly for purposes of driving dividend income (REITs). I say 2.9% as a "safe" figure in context of investments that are more-or-less idle without all the stress (i.e. holding a bunch of TSLA is not always fun). In reality, my total portfolio is more than doubled YTD, but I wouldn't publish that as a typical figure.

I prefer the other side of that trade. Losing a grand or two a month for a year and then making 100k is lots of fun.

How are these fees so low? Is there anything stopping you from taking the money and investing into index funds? I feel like I must be missing something. The most conservative investment options I know of all have >1% expected returns.

Many brokers, including IBKR, set their interest rate to be a small increase over the federal interest rate.

The federal rate is currently 0.25%. They set this rate extremely low to encourage the exact behavior we are seeing here - investments in the US economy.

I have a 1.4x leveraged portfolio with similar reasoning.

Worth noting: the implied interest rates on other forms of leverage (futures especially) are probably lower still. And though using long-term in-the-money call options might be a bit more expensive, they have the nice quality of having limited downside. If the underlying tanks hard you won't be forced to sell, and you might even still have some extrinsic value.

Where are you getting margin fees less than 1%? Per year?

They said IBKR. Margin rates here: https://www.interactivebrokers.com/en/index.php?f=1595

Subject to change at any time, but 1.59% per annum up to $100k, 1.09% up to $1M, and 0.75% after that. Lower rates in some other currencies.

How did you earn the money to invest?

Income from my job. No side projects pulling in cash (yet). Getting close on a few though. Hoping I can post something far more interesting here next year when this question comes around again.

The next few years will be a very interesting time in global markets, so whichever way it goes, I'm sure you'll have something to write about. ;-)

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