Playbook #075: Royalties (Intellectual Property)
🖼️ The Big Picture
Musicians get paid royalties whenever their songs are played on the radio, or used in movies or TV commercials. But investing in all kinds of royalties has become an attractive alternative asset class with true passive income that everyday investors can get involved in easier than you might think.
Royalties are compensation for the ongoing use of or ownership of an asset, and can include intellectual property such as songs, movies, patents, educational material, and even sounds like alert tones:
While investors love how passive royalties are (once you buy or create it, you sit back and collect the check), in most cases the assets will depreciate over time. What that means at a practical level is that your income stream slowly dwindles. Think of music. Most top 40 songs will do their best in the first year, and then fall off considerably as new music is made.
If you have specialized knowledge in one of these areas, you can create or buy a new royalty stream, or invest in a fund that specializes in these types of investments.