Discovering The Power Of Residual Income

With the job market sinking lower every day and more people seeking employment of gainful income, everyone needs a little bit of extra money for the monthly household expenses.But, who has the ability to invest the time necessary to develop a second job?Pulling down the extra hours is exhausting, a trading hours for dollars, and rarely is the compensation for such a task worth the effort you must put in towards your employers' objectives.

However, if your second job generates ongoing and reliable residual income, your situation is entirely different and less stressful.Residual income is passively generated, meaning that you have the potential to get paid over and over again consistently for past work completion and efforts invested.A dollar of residual income is worth three times more than a dollar earned by traditional job income.

How Residual Income Is Generated

Whenever you do a certain action task at work, you expect a logical monthly or weekly compensation for that successful completion result.

Most people never look beyond linear compensation.In a linear model, you work a certain number of hours, you are paid per hour or on a fixed salary based upon the job you do and how many hours you worked.Similarly, when you are paid per job, you get paid based upon how many job events you specifically complete in a given time period.There is a direct correspondence between how long you work and what you are paid.Stop working, and you would stop being paid.

With residual income, however, the income doesn't stop necessarily once you stop investing the initial effort.The initial expenditure of energy in your business building endeavors continues to drive your profits in the form of sales overrides, allowing you to reap the rewards of your teamwork long after you have stopped working.By setting yourself up well at the beginning and by making the right choices, you will continue to reap passive profit on prior efforts after the fact.

What Types Of Businesses Create Passive revenue?

Generally speaking, businesses that involve distributing a product in high-demand tend to be best for creating passive revenue due to monthly reorders placed.There are a number of different businesses that can be included in this umbrella, and finding one that suits your particular interests and schedule is becoming easier.

To illustrate how passive revenue is created, it is helpful to examine a particular business that generates such revenue.Some sales businesses are a type of distributorship that generates residual income based upon sales and customer reorders of the Zrii beverage, a healthy nutrient beverage that features the amalaki fruit.Like most businesses, which generate passive income, these business owners may see a number of future monthly reorders.

Monthly passive income is generated based upon an original client base.With any type of passive income business, the monthly revenue can be increased by reaching out to a broader client base through various marketing techniques.This does require some effort, but in the end your new clients should develop in to more increases in a passive revenue stream.

Stability And Prosperity, Even In A Troubled Economy

Perhaps the greatest strength of residual income is its ability to stay strong, dependable, and consistent even during difficult economic times.

Even as the stock market plunges, residual income is hardly affected, and businesses that rely heavily on passive revenue may remain minimally negatively affected.The work done previously to establish a passive revenue business continues to pay off, with the client base continuing throughout a downturn.Even if used only as a secondary source of income, passive revenue is a powerful aid in a troubled economy.

About the Author

Christine O'Kelly is an author for Zrii Amalaki, an independent Zrii business representative and part of the Zrii prosperity network.

Zrii distributors generate residual income by distributing the powerful, health giving amalaki fruit.

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Warren Buffetts Investment in Goldman Sachs

Warren Buffett, CEO of Berkshire Hathaway, continues to use his firms enormous cash reserves to make purchases into some of the most valued, but down trodden, American companies.Buffett declared another deal this week, the first week of October, 2008: Hes purchasing 5 billion worth of perpetual preferred stock in Goldman Sachs NYSE:GS, plus an option to buy at a greatly discounted rate for the next 5 years..Buffett will get a 10 dividend and the stock is callable after three years at a 10 premium.

As arguably the worlds greatest living investor, Buffetts investment moves are always watched by the public and news media.When Buffett invests in a firm, like Goldman Sachs, its a very valuable endorsement.This time its an endorsement of not only this company but the free market system.

To determine why Buffett found this a good investment, I looked at many criteria as found in the book Buffettology, written by Buffetts former daughter-in-law, Mary Buffett and the website validea.Given Buffetts new investment in Goldman Sachs, I thought it would be worthwhile to look in detail at the common stock.

GS earns high marks based on my Buffett strategy, earning a score of 79 out of 100.Lets look at what the Buffett strategy likes about Goldman Sachs to shed some insight into one way Buffett may have looked at this investment.First off, Goldman Sachs is a large global bank holding company that engages in investment banking, securities and investment management.Goldman Sachs was founded in 1868, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street.1 Goldman Sachs has offices in most major world financial centers.

The firm acts as a financial advisor and money manager for corporations, governments, and wealthy families around the world.Goldman offers its clients mergers & acquisitions advice, underwriting services, asset management, and engages in proprietary trading, and private equity deals.It is a primary dealer in the U.S.Treasury securities market.In short, it has a "big moat", a Buffett criteria.

Thats the qualitative side of it.Now lets look at the quantitative side, which is where my Buffett model comes into play.GS has the steady, reliable earnings history that Buffett likes to see.Buffett likes companies to have solid, stable earnings that are continually expanding.This allows him to accurately predict future earnings.Annual earnings per share from earliest to most recent were 5.67, 5.57, 6.00, 4.26, 4.03, 5.87, 8.92, 11.21, 19.69, 24.73.Buffett would consider GSs earnings predictable, although earnings have declined 3 times in the past seven years, with the most recent decline 6 years ago.The dips have totaled 36.2.GSs long term historical EPS growth rate is 14.4, based on the 10 year average EPS growth rate.

Consistent profitability is not enough.In addition, Buffett likes to see a high return on equity ROE.Over the past 10 years, GS has an average annual ROE of 19.3.Thats plenty good for meeting this models 15 minimum requirement.The ROE for the last 10 years, from earliest to latest, is 37.7, 24.3, 17.5, 11.1, 10.0, 12.8, 17.1, 17.5, 22.7, 22.6, and the average ROE over the last 3 years is 20.9, thus passing this criterion.GSs management has proved it can earn shareholders 21.4 return on the earnings they kept.This return is more than acceptable to Buffett.Essentially, management is doing a great job putting the retained earnings to work.

Share buybacks are also important and GSs total shares outstanding have fallen over the last five years, although the half-billion share secondary offering on Thursday will no doubt alter that trend.

So, for the most part, the firm gets high scores on a fundamental basis, but there are two measures where it falls short.One is the Capital expenditures and another is return on assets.Both are likely to improve and Buffett has required key management to hold their shares during the time Buffett remains invested.

After the business analysis is done, he then moves onto the question, "Is the price right" Consider this: GSs stock is currently at 128, down from a high of 225 a year ago.We know that Buffett wants to invest when others are most "fearful" and at a price that gives him a reasonably good chance at making a profit over the long run.

Buffett gets a great deal with these preferred shares, but I think long-term investors may be presented with a wonderful buying opportunity here in the common shares as well.While this is a favorable piece on GS, it is more about providing you with insight into how to evaluate stocks for your own investment success.
About the Author

Dr Barry Lycka is founder of