Why Create Passive Income - The Difference Every Investor Needs to Know

Being at home and having money flowing in – the dream of many that can actually become a reality. It’s not a scam, but a matter of understanding the right plan. This article will guide you to know what Passive Income means, how it generates income, and which method best suits your situation.

Passive Income is a Continuous Cash Flow

Passive Income simply means money that flows in continuously without you having to exert effort. For example, when you rent out a house, rental income comes in every month; or if you hold stocks that pay dividends, you receive dividends quarterly without doing anything.

The key is that Passive Income mostly comes from holding assets that generate steady cash flow – it could be licensed (photos, eBooks, music), or tangible assets (land, stocks, cash), and letting them work for you.

3 Types of Income Investors Need to Understand Deeply

Besides Passive Income, there are two other distinct types of income:

Active Income - Income from work Salaries from employment, babysitting, cleaning – all require effort. When you stop working, the income stops. You need to work constantly to maintain this income.

Portfolio Income - Income from trading Profit from buying and selling stocks, gains from investment contracts – occur only once when you sell, but can be repeated. Part of the dividends received can also be counted as Passive Income.

Passive Income - Income that flows on its own You don’t need to work or exert effort; income still flows to you. This is what makes Passive Income an attractive option to supplement other income streams.

Example comparison: same profession but different approaches

8 Ways to Start Building Passive Income Every Day

1. Create Licensed Products - No initial capital needed

Books, music, digital templates, photos – all can generate Passive Income because they can be sold repeatedly without additional costs via platforms like:

• Shutterstock / Adobe Stock for photos and illustrations
• Amazon / MEB / Ookbee for eBooks and audiobooks
• Canva for digital templates
• YouTube / Facebook – earning from views

Advantages: No investment needed, one-time creation lasts forever, usable for many years.

Risks: Platforms take a share for themselves; you only get a portion of the revenue.

2. Fixed Deposits - The classic, low-stress method

Choose a term, deposit money in a bank. When the term (half-year 1 year) completes, the bank pays interest. Just sit back and wait for the money to come back.

Advantages: No effort, fixed interest rate, predictable, low risk.

Risks: Requires large capital to get satisfactory returns, interest rates are relatively low, 15% withholding tax applies.

3. Bonds and Debentures - Slightly higher returns

Buy bonds or debentures (Coupon Rate), receive regular interest. Rates vary depending on issuer credit – government bonds pay lower interest but are less risky; private debentures pay higher interest but with higher risk.

Advantages: No effort, steady returns, higher than fixed deposits.

Risks: Need initial capital, 15% withholding tax, risk that issuer may default.

4. Endowment Insurance - Savings with insurance benefits

Save money through an insurance company; upon maturity, receive back the principal plus interest of 2-3% per year, with life insurance benefits included.

Advantages: No effort, includes life insurance, no 15% tax like deposits.

Risks: Requires large investment, lump sum at the end, no monthly payouts.

5. Rental Property - Income from assets

Houses, condos, land – rent them out and receive monthly rental income. Besides passive income, property value may appreciate over time.

Advantages: Continuous passive income, property value increases, owner retains ownership, start earning from the first month.

Risks: Requires significant initial investment, income depends on tenants, maintenance and repairs needed.

6. REIT Units - Real estate traded like stocks

Instead of buying property yourself, invest in a trust that holds various real estate (offices, hotels, infrastructure), earning dividends from rental income collected by the trust.

Advantages: Lower investment, easy to buy/sell, diversified property types.

Risks: Dividends taxed at 10%, unit prices fluctuate with the market.

7. Dividend Stocks - Parallel returns

Buy stocks with consistent dividends, earning Passive Income at 6-8% annually. Stock prices may also increase, adding Portfolio Income.

Advantages: Receive Passive Income plus growth from stock appreciation, higher returns than trusts and deposits, easy to trade on stock exchanges.

Risks: Dividends taxed at 10%, stock prices may decline, choose stable, dividend-paying stocks.

8. Crypto Staking - High returns for front-line investors

Stake your held cryptocurrencies in a Staking Pool, earning 3-5% or even dozens of percent per year.

Advantages: High returns compared to other methods, easy to trade on platforms, Passive Income plus Portfolio Income.

Risks: High risk, potential total loss if platform lacks credibility, unclear tax regulations, not suitable for beginners.

Summary - Passive Income is Not a Dream, But a Plan

Passive Income means a way to build wealth without relying solely on a salary. There are many options, from no capital needed to large investments.

The key is to choose methods that match your financial situation and knowledge. Everyone has a different path to wealth – the most important thing is to start and select the right approach for yourself.