The example of a web app as a passive investment is crazy -- how many apps exist that won't require support, ongoing maintenance, etc? That's significant work.
Stocks, bonds, mutual funds -- the returns here are small enough that you can't generate income to live on without a huge up-front investment. If you could manage a consistent 8% yield you'd be doing well, and it would $1M to generate an $80k annual income.
Real estate -- I know a couple of part-time landlords, and this is not passive work. They have to deal with tenants, maintenance, etc. Sure, you can hire a property manager, but that cuts into your returns.
Royalties -- This is hardly passive. What's the half-life of IP these days? You can write a book, but it will likely be out of print within the year. If you manage to publish something reasonably popular, you'll likely have to build a franchise around it, which means that you'll have to work at writing more books. Even if you hire ghost writers, you have to find them, manage them, deal with marketing, etc.
One of the takeaway lessons I got from b-school was that "there are no long term economic rents". In other words: if something is profitable (easy money), then other people will enter the market and the profitability will decline. Sure, there are barriers to entry, etc. but all else equal the crowd will follow the easy money and suck the profit out of it.
"Real estate -- I know a couple of part-time landlords, and this is not passive work. They have to deal with tenants, maintenance, etc. Sure, you can hire a property manager, but that cuts into your returns."
I posted somewhere down the thread that this has been my observation from watching my grandparents and father manage their investment properties (which were their retirement fund as retirement money in Uruguay is only good for basic survival).
"f something is profitable (easy money), then other people will enter the market and the profitability will decline"
Yep, but as you said, there are psychological barriers of entry which make the "short-term" profitability good enough for an individual, yet bad for foreign investors.
For example, you can make a 12% profit off real estate rentals here in Uruguay now, it's shifting downwards due to the market pressure, but for us locals it looks like a low-risk, high-reward investment opportunity, but for people in the developed world, the perceived risk of investing in a South American country is too great (and I'd agree, they need a local partner to avoid getting fleeced by the government, or investing in the wrong places, etc... local knowledge basically).
As it usually happens, I'm currently in debt and cannot take advantage of the investment opportunities (fortunately my parents and grandparents can :) ).
It's possible to make real estate income passively. The rub is that you either have to have lots and lots of money or lots of friends with lots of money. Either way, you need lots and lots of money to pull it off.
Many years ago, I worked for a property management company who's sole client was a partnership of about 30 people. Between the partners, only two were active partners. The rest did nothing more than show up during the first week of the month to get their disbursement check. This was before direct deposit was widespread.
Of course, the holdings were all commercial, were valued collectively at ~80 million, from initial investments of around ~15 mil (adjusted).
The main problem with "passive" income is that margins on passive income are so low that you need a huge amount of investment to make anything meaningful. You have to keep developing streams of income to replace ones that have burnt out. And you have to keep shoveling your profits back into the venture.
The example of a web app as a passive investment is crazy -- how many apps exist that won't require support, ongoing maintenance, etc? That's significant work.
Stocks, bonds, mutual funds -- the returns here are small enough that you can't generate income to live on without a huge up-front investment. If you could manage a consistent 8% yield you'd be doing well, and it would $1M to generate an $80k annual income.
Real estate -- I know a couple of part-time landlords, and this is not passive work. They have to deal with tenants, maintenance, etc. Sure, you can hire a property manager, but that cuts into your returns.
Royalties -- This is hardly passive. What's the half-life of IP these days? You can write a book, but it will likely be out of print within the year. If you manage to publish something reasonably popular, you'll likely have to build a franchise around it, which means that you'll have to work at writing more books. Even if you hire ghost writers, you have to find them, manage them, deal with marketing, etc.
One of the takeaway lessons I got from b-school was that "there are no long term economic rents". In other words: if something is profitable (easy money), then other people will enter the market and the profitability will decline. Sure, there are barriers to entry, etc. but all else equal the crowd will follow the easy money and suck the profit out of it.