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What is passive income?

Modified date: 09/06/2020
What is passive income

It's great to regularly receive money income and do nothing for it, like a lifetime pension. Everyone dreams of such passive income. But retirement is still far away, and money is needed now.

In scientific terms, passive income is an income that does not depend on daily activities. Regardless of whether a person works or rests, he will receive regular payments. Such income will allow a person to be sure that he will not remain hungry and without a roof over his head. And if passive income exceeds expenses, then it is possible not to work at all and focus on family, hobbies, and other leisure activities.

There are various sources of passive income:

  • Bank deposits and bonds.

    Bank deposits and bonds accrue interest. They will not bring significant profits, but they will save money from inflation. It is possible to open a deposit at any bank for any period with additional replenishment or withdrawal options. The maturity and value of each bond are strictly defined, but the yield on them may vary. This is the most affordable form of passive income, but not very profitable.

  • Securities.

    Shares price of profitable companies is rise. Also, these companies regularly pay dividends - part of the company's profits. Dividends are proportionally distributed among investors, according to the contribution. Securities may bring a lot of side income. But to select a profitable company from thousands of other companies on the market, you need to be an experienced analyst. Or you can entrust the money management to an investment company that invests money and pays the client a percentage of the income.

  • Real estate and equipment.

    Real estate and equipment can generate passive income in the form of rents. This type of passive income is available to those who have real estate or specialized expensive equipment that is cheaper to rent than to buy for one-time use. For example, equipment for film and video filming, or equipment for diving, etc.

  • Copyright.

    Writers, poets, inventors have copyrights to everything that they have created. The author receives income (royalties) for using his creations by other people. Copyright may be a commodity. A copyright buyer also earns revenue. So if you have talent in the field of art or invention, it is worth trying to create something unique and get yourself a passive income.

Another innovation can make passive income a mass phenomenon. The governments of different countries are discussing the possibility of providing their citizens with unconditional basic income. These are regular gratuitous payments to ensure the basic needs of citizens, regardless of employment and material condition. Some countries support this initiative and have even begun testing; some are only discussing this idea. The governments of Switzerland and Hungary do not support these payments. Due to the automation of many professions, more and more people will lose their jobs, and unconditional basic income may become a necessity for their survival.

Having a passive income is a dream of any person, but not everyone can create it. Deposits are not profitable enough. Without a real estate, you will not get rent. There are not many talented writers and inventors either. The only way available for each person to create a passive income - investment. Even without special skills and with a small amount of money, you can start earning regularly.

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