📊 Index Funds & REITs: How I Made $70K in Passive Income Through Diversification

💰 How to Protect Your Money From Inflation

Once you've invested in yourself and started bringing in high income, you need to grow that money and protect it from inflation.

We all know:

Groceries that used to cost $300 now cost $500
Rent that used to be $1,300 is now $2,000

Money sitting in the bank loses value every year because the purchasing power of the dollar keeps going down. That's inflation.

But when you invest in stocks, your money is growing at a pace faster than inflation. Anyone who invested in stocks has steadily outpaced inflation by 7% a year on average.

📈 Two Ways Stocks Make You Money

1️⃣ Capital Gains

When you buy a stock at $50 and sell it later for $200, that's a $150 capital gain.

2️⃣ Dividends

When you buy a stock, you're actually buying a little piece of ownership in an actual company. When the company makes profits, as a partial owner, you get a small proportional share of those profits. That's what you call dividends, and they usually get paid quarterly.

Dividends are the most passive form of income you will ever find on the planet! 💵

Rather than pulling out dividends to spend, I actually keep them in my account and reinvest them automatically. This compounds your money even more because not only capital gains but also dividends are continually being reinvested.

Investing just $20 a day could turn into $1.2 million in 30 years!

⚠️ The Risk of Individual Stocks

Most people when they hear stocks think of investing in things like Nvidia, Apple, or trying to pick out the next Amazon. But that kind of investing is very risky for beginners.

When you put all your money into one or just a handful of stocks, you risk losing all your money.

Real Examples

Thousands lost their life savings in the 2001 Enron scandal
Kodak went bankrupt in 2011 - failed to keep up with digital camera innovation

Obviously it would be great if you could pick the next Nvidia and 10x your money, but that kind of investing takes deep industry expertise, research, and yes, some luck.

🎯 Index Funds: The Secret Weapon of Diversification

That's why my preferred way of investing is in index funds.

What Are Index Funds?

An index fund is basically a collection or basket of stocks. They often have hundreds and sometimes even thousands of different stocks in that one index fund.

Instead of putting all your money into one company, you're buying hundreds, if not thousands of little pieces of ownership in many different types of companies.

The Restaurant Analogy

Think of going to a restaurant and ordering one big entree as your entire meal. What if that meal isn't good? You've just wasted all your money, right?

Or you could get the appetizer sampler platter, which has 10-20 different little dishes like tapas, giving you a little taste of everything on the menu.

That way, if you don't like a few things, no big deal—there are all these other yummy things on the platter.

An index fund works the same way. If one company doesn't do well? No problem, because you've got hundreds of other companies in that index fund.

This is called diversification, and it's the secret sauce that makes investing way less scary and frankly kind of a no-brainer.

📋 The Two Index Funds I Hold

VTI - Vanguard Total Stock Market Index Fund

Contains over 3,500 companies
By buying this fund, you get exposure to pretty much every major company in the US
When you own every company in the US, you essentially own a cross-section of the entire US economy
Given how the US economy has performed over the last century, you can see why this has been a good investment

Another great thing: Very low expense ratio

Always want to keep your fees below 2%. A small percentage might not sound like a big deal, but because fees compound over time just like returns, a 1% difference in fees can actually cost you hundreds of thousands of dollars over your lifetime.

VXUS - Vanguard Total International Stock Index Fund

We live in a big beautiful world where the US is not just the center of the universe.

This fund gives you international exposure to:

Europe
Asia
Emerging markets like the Middle East and Latin America

🏠 REITs: The Easy Way to Invest in Real Estate

We've all heard how rich people love investing in real estate, that real estate builds wealth and passive income.

But the thing is, most of us don't have $200,000 sitting around for a down payment, right?

Not to mention, real estate is not so great for beginners because when something goes wrong, it can be very expensive.

A car crashed into one of my rental properties. That whole mess took 13 months to clean up. 😅

Investing in real estate really isn't as passive or as safe as you might think.

But There Is a Way!

Long before I had enough money to buy property, I was already investing in real estate through REITs.

What Are REITs (Real Estate Investment Trusts)?

REITs are basically a company that owns a lot of real estate.

What REITs can hold:

🏢 Apartment complexes
🛒 Shopping malls
🏬 Office buildings
🏥 Medical buildings
📦 Warehouses
💻 Data centers

Think of REITs as basically real estate stocks—shares of ownership in companies that own real estate.

The Best Part About REITs

REITs are required by law to pay 90% of their income out to you in the form of dividends. That's how you get passive rental income without the trouble of being a landlord.

I get dividends from my REITs every single quarter. Compared to the monthly rental income from my rental properties, REIT dividends are some of the easiest money I make.

📋 The Two REITs I Hold

VNQ - Vanguard Real Estate Index Fund

Primarily holds US properties
Many different types of properties
Gives me peace of mind because I'm not overly invested in one region or one type of real estate

VNQI - International Version

It's cool to think you can own a little piece of ownership in:

🇯🇵 Mitsubishi buildings in Japan
🇩🇪 Venovia buildings in Germany
🌍 A little piece of real estate all over the world

🛡️ Bonds: How to Protect Your Wealth

So far we've talked about investments that made me a lot of money. But a key part to becoming a millionaire isn't just making a lot of money—it's also keeping the money you make.

As billionaire investor Warren Buffett said:

"Rule number one, don't lose money. Rule number two, never forget rule one."

It's human nature to get greedy and start chasing a lot of money, but you also have to think about your downside.

What Are Bonds?

With stocks, you're owning a piece of company, and when that company does well, you make a lot of money.

With bonds, you're just lending money to companies in return for interest payments. Because you're lending money, it's a lot safer—your upside is capped, you don't get any share of the profit, but they have to pay you every single month with interest.

When the stock market crashes, bonds usually stay very stable because everyone is running away from stocks into something safe like bonds.

That's why I invest 10% of my money into bonds. Not to get rich, but to stay rich and to protect my money when everything goes sideways.

The Bond Funds I Hold

VGIT: Intermediate-term government bonds
VGSH: Short-term government bonds

💭 The Millionaire Mindset

"Be an owner, not a consumer. That's why you have to invest, and that's how investing makes you a millionaire."

All of these investments can be started with as little as $100. And every single one of them played a part in becoming a millionaire.

Remember:

Invest consistently every single month via dollar cost averaging. Whenever you have money to spare after paying bills, paying debts, and investing in yourself, always put money into stocks.

Diversification makes investing way less scary and frankly kind of a no-brainer. ✨