In an era of declining returns on passive investment, passive income investors may have a good shot at growing their fortunes by paying down debt and investing in their future.
A new report from Zacks Investment Research shows that passive income investments have seen a 50 percent increase in annual returns in the last five years, while the typical investor is getting back a greater than 20 percent return on the same amount of money.
The research found that the average investor is seeing an average return of 7.7 percent on the $1.8 million they invested in 2017.
A report by Zacks released this week showed that active wealth investing has outperformed passive income investment in the past few years, with the passive investor seeing a 7.4 percent annualized return on their investment, compared to a 6.5 percent annualization for active wealth funds.
Zacks research shows that active investors are seeing their returns rise by 10.5 percentage points from a year ago, while passive investors saw their returns fall by 5.5 points.
This suggests that the passive income investor is making more money out of their investments than they have been making in the same period of time.
The report also found that active owners of small businesses are making about 7 percent more per year than the average owner of a larger business, and this could be the reason that the median net worth for active owners has grown by $2,500 over the last three years.
The average owner with $100,000 in assets owns about $2.7 million in passive wealth, and the average $100 million owner owns $2 million in active wealth.
The median passive wealth per owner is about $300,000, while active wealth is $1 million.
The Zacks study found that for every dollar invested in active or passive income, there are approximately $3.60 in net assets lost due to debt.
This means that the cost of debt for an average active or active wealth investor is less than the cost to pay off the debt.
Investors can also get a big return by holding assets for longer periods of time, such as buying a house or holding on to retirement savings.
For example, the average lifetime net worth of active wealth investors is $8.6 million, and for those who hold their wealth for 20 years or more, their lifetime net wealth is nearly $1 billion.
The study shows that while the average active wealth owner’s portfolio is likely smaller than a typical passive investor’s, the passive asset allocation can help the average asset owner grow their wealth.
This article originally appeared on ESPN.com