Ryan Holiday is a popular American author that is regarded as an advocate of modern stoicism. In a recent podcast, Ryan talks about how he makes his money and how he turns his income into assets that generate passive income over the long term.
Making Earned Income
As you may already know, Ryan Holiday makes his money writing books, making videos and podcasts, and making appearances as a keynote speaker at conferences.
He earns a living by creating derivatives from his intellectual property, in the form of books, YouTube videos, and podcasts, that generate income for him.
“I make my living from my brain. I come up with ideas and those turn into books. I make creative stuff on social media, I make things like videos. This is both my asset and my liability. If I fell and hit my head, if I ran out of ideas, all these would get in the way of me earning my living.”
Invest In Safety First
So, every work comes with a liability. You could either get fired from a job or lose the ability to continue performing a particular job.
Either way, we all need a safety net to continue earning a living, in the eventuality that our primary income ceases.
Ryan Holiday has an interesting take on this.
He doesn’t gamble with his earned income or take any risk with it for that matter. Instead, he securely invests in safe assets that are proven to generate recurring income.
“I try to take the money that I’ve earned from my creative pursuits and put it into things that are safe but also don’t depend on me being smart on an ongoing basis. Real estate is a form of this, obviously stock market, index funds, etc.”
That’s definitely a smart way to invest. You first invest in stability, then you start taking on bigger risks.
Like I do say, the primary goal of a savvy investor is to keep their capital safe, and then make some gains on it.
Invest In Assets That Generate Income
What is investing if you can’t make some profit with your capital?
Ryan Holiday is particular about investing with a goal to create an income that is big enough to replace his primary income.
To him, this isn’t just a sport. It’s a real-life plan to create assets that create respectable income flow. It’s either this or nothing.
“I want to save as much of the money that I make as possible and then I want to invest in ways that create income so that as I did early in my career when I had a day job, I can make decisions and know that if the well runs dry tomorrow, I have assets and vehicles that earn a reasonable living wage that can support me and my family.”
In my opinion, investing in assets that generate enough income to replace your primary income is no joke. In fact, it’s a do or die affair.
It takes the right amount of financial knowledge, strategy, and risk management to replicate your primary income via investments.
And I believe that’s what everyone should strive for.
Diversification Is Not Risk Aversion
According to Ryan Holiday, putting your eggs in many baskets shouldn’t be misconstrued as being risk averse. Rather, it should be seen as one of the ways to manage risk.
This is the guiding principle for most index funds today(e.g Vanguard 500 and S&P 500), and they’ve proven over the years to outperform many private and organizational investors.
“The stoics, while not afraid of risk, do try to mitigate and spread risk out and that’s what diversification is really about.”
In my opinion, diversification is the weapon of a true investor. No experienced or sophisticated investor invests without diversification.
Not because they are risk averse, but because diversification while spreading out risk, helps to broaden their investment net and capture more value over the long-term.
In essence, it’s a must-have for every serious investor.