- Delegate the management of the portfolio to someone. This is how you make it passive. If you are doing a lot of the job of the securities selection, rebalancing, adjustment during key market events, accounting for dividends, your solution is not truly passive.
- The portfolio needs a certain level of return which is related to how long you wish the money to last. If you require the income to last a long time, due to the unpredictability of the world, you will need a buffer for returns. This affects your required allocation to higher risk, higher return assets like equity.
I have been looking at the financial independence retire early space for a while and one of my pet projects is to study how to create this perpetual income portfolio that provides a consistent inflation-adjusted income stream in a passive manner.
So far, here is how we set it up based on my years of looking into this:
