What is passive income?
Passive income can be defined as earnings generated with minimal effort or active participation in earning activities. While the notion of “making money while you are asleep” simplifies the concept, achieving passive income requires initial investment, work, or setup. Passive income is generally earned through rental properties, engaging in cryptocurrency investments, or holding stocks that generate steady returns without needing continuous, direct involvement. While some passive income streams may initially require significant attainment to establish, they eventually generate income independently, allowing individuals to earn money even when they are not actively working or involved in day-to-day operations.
Passive Income Explained
Passive income is an attractive means of boosting earnings with minimal effort. By investing a small amount of money or time in various products or ventures, individuals can create and maintain alternative income streams. This not only provides financial security but also acts as a safety net during unforeseen circumstances such as job loss, early retirement, or economic crises.
Several popular avenues for generating passive income include investments in high-dividend stocks, dividend index funds, ETFs, bonds, bond market index funds, REITs, rental properties, and high-interest savings accounts.
Additional strategies for passive income generation include peer-to-peer lending with self-charged interest and participation as a silent partner in a business or enterprise. Lending money to a limited partnership can also result in additional income through interest payments.
Fractional real estate investment is particularly appealing to retail and NRI investors due to its affordability and potential for capital appreciation. Crypto staking offers the advantage of trading flexibility and the opportunity for price appreciation without locking funds in fixed deposits.
There are mainly three types of passive Income as follows:
Property income: This includes profits generated from ownership of capital, rental income from real estate or property, and interest earned from financial assets.
Trade/business-related activities: In this type, individuals invest in businesses without actively participating in their operations.
Royalties: These are payments made by one company or individual (licensee) to another company or individual (licensor) for the right to use their intellectual property, such as music, videos, or books