Passive Income

Passive income refers to earnings generated with minimal ongoing effort or active involvement from the recipient. The concept embodies the idea of “earning money while you sleep”, although most passive income streams require initial effort, investment, or setup.

Key Features Minimal Ongoing Effort After the initial setup or investment, income flows without continuous active work. Initial Investment or Effort Most passive income sources require upfront resources, such as: Capital investment (stocks, bonds, rental property) Time or effort (writing a book, creating an online course) Common Sources Rental income from property Dividends from stocks or mutual funds Interest from fixed deposits or bonds Royalties from intellectual property (books, music, patents) Earnings from automated online businesses or apps Advantages Provides financial stability and diversification of income Reduces dependence on active employment Potential to scale income with minimal additional work Limitations Often requires significant upfront capital or effort Income is subject to market risk, tenant risk, or business performance May still require some monitoring or maintenance

Example: Investing ₹5,00,000 in dividend-yielding stocks: Stocks pay 6% annual dividends → ₹30,000 per year No further active work needed, providing a steady passive income stream