Passive income refers to earnings derived from activities in which an individual is not actively involved on a regular basis. Unlike active income, which requires direct effort and time, passive income allows for earning money with minimal ongoing involvement after the initial setup phase. Here's an introduction to passive income and its various types:
Types of Passive Income:
Rental Income:
- Real Estate: Owning property that generates rental income is a classic form of passive income. This could be residential or commercial property.
- Land: Renting out land for agricultural or other purposes can also generate passive income.
Investment Income:
- Dividend Stocks: Investing in stocks that pay regular dividends can provide a steady stream of passive income.
- Bonds and Treasury Securities: Interest payments from bonds and treasury securities can be a source of passive income.
- Mutual Funds and ETFs: Some mutual funds and exchange-traded funds (ETFs) distribute dividends or interest income regularly.
Royalties:
- Intellectual Property: Royalties from patents, trademarks, copyrights, and royalties from creative works such as books, music, or films can generate passive income.
- Franchises: Franchise owners can earn passive income from franchisees in the form of royalty payments.
Business Income:
- Limited Partnership: Investing as a limited partner in a business where you are not actively involved in day-to-day operations.
- Online Businesses: Creating and monetizing websites, blogs, or eCommerce stores that generate income through advertising, affiliate marketing, or product sales.
Peer-to-Peer Lending:
- Investing in platforms that connect borrowers with lenders can generate interest income as a form of passive income.
Digital Products and Courses:
- Selling digital products such as e-books, online courses, or software can provide passive income once created and marketed.
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