Finxter is at the intersection of programming, business, and productivity so we get this question a lot.
In this article, I want to share three ideas on how you can invest one or two weeks coding which will then produce passive income for years to come.
Definition: You create a software product or website once and earn passive income for years.
But be warned: It won’t be much — up to a few hundred bucks per month. If you want to live from your passive income, you obviously have to repeat similar types of projects until you’ve reached your preferred level of passive income.
I) Crypto Trading Bot
The first idea is a crypto-currency trading bot. It sounds stupid because it’s well-researched that you as a beginner trader cannot really beat the market. For example, if you try to be an active portfolio manager in the stock market, you’ll most likely be WORSE than the market. And the reason is that markets are mostly efficient: all publicly available information is already “priced-in”.
So why should trading crypto-currencies be any different?
Because I realized that crypto-currencies are not efficient at all. There are a few cryptocurrencies I played around with which have a very large spread: the difference between the “buy” price and the “sell” price is quite large. The reason is the illiquidity of the currencies. In those illiquid markets, oftentimes there will be a person who just wants to buy a large amount of this currency. To do this, they need to pay the large spread. This is where you can come in:
For example, you can constantly trade between two cryptocurrencies A and B: You hold 100 units of coin A which is at price 1. So you can trade one unit of A for one unit of B. You create an order selling A for 1.2 units of B and just wait. As soon as it is fulfilled, you own 120 units of B. Now, you create a new order selling B for 1 unit of A (assuming the spread is 20%). Again, you need to wait until the order is fulfilled. As soon as it is fulfilled, you hold 120 units of A.
Of course, this is not a guaranteed strategy — it may work or not. And you need to come up with your own ideas and algorithms to improve upon this strategy. If you want to learn more about trading the bid/ask spread, check out this article: Wikipedia.
Then, you need to try different algorithms. The only reason why it’s easier than stock trading is that there are often people who buy any price. They don’t care.
After the one-time trading, your bot is just running automatically — 100% passive income. (If you prove it to generate income.)
II) Obscure file format converter
People need to convert file formats. There’s a lot of competition for the main file formats. Don’t go for them. Simply choose to obscure file formats like Latex to Markdown, video to a transcript of a strange language, or Excel to png.
There are always a small group of people who are seeking your conversion tool. Maybe they need it for their business, as employees for their companies, or just to save them time. It’s very useful for them and therefore, they are willing to spend a small amount of money (e.g. $10-$20) to solve the problem. When I wrote my first ebook, I bought such a converter from Kindle to epub3.
If you find a tool combination which is obscure enough, it’ll become very easy to rank #1 on Google (because you’re the only one doing it). That’s it. Watch traffic coming and money rolling in. Then, rinse and repeat with the next converter.
Be smart about it and think about the long-term changes in the marketplace. Voice will become more important due to tools like Alexa or Siri. Use this to ride the trend and get a huge prospective growth.
You can sell your software via resellers such as Digistore who do the shipping, payment, and taxes for you. You just collect your royalties.
III) Sell data sets
Focus hard on one type of information and write web crawlers to generate niche data sets. Don’t be afraid to niche — the more niche, the better. People will pay $100 or more for niche data sets that provide enough value.
Data is the new asset class in the 21st century. If you own data, you own the asset which you can resell or rent out.
For example, sell trends, statistics, and data analysis for dentists analyzing emerging trends in the dentist market.
These are my three ideas for passive income as a coder. They are relatively easy to set up (it’ll still be a lot of work — there’s no free lunch here). But all of them have great potential to earn you a few hundred bucks a month.
Leave a comment below with your own ideas for passive income with Python!
Read more on my following blog article to learn about the #1 thing you must do to increase your odds of creating a good stream of passive income…