What is Passive Income?
It is the income you receive from a rental property or some enterprise which you are not actively attached to. Some say that you do not have to actively monitor or invest effort in passive income, however, this is not the case. As with active income, passive income is also taxable.
Here is an example. You are 28 years old, have a stable job and earning a fixed monthly salary. This is the route that most people follow after school. However, you have come to a point in your career where you feel you are ready for the next big step in your life.
You weigh the options available to you to conclude two possible ventures you will follow. One, start working on your own company and risk not being paid a decent salary for a few months. Two, keep your job, but purchase property with your savings and rent it out. The latter is passive income. All you need to do is draw up contracts for the renting out of your property, advertise and choose a tenant. Now the money will come in monthly while you do little to now work further.
Passive income may be passive in the sense that you do not spend all your time earning it, but if you do not monitor your passive avenues, you may be at loss very soon. Taking the example mentioned above, if you do not do inspections on the state of the property which you are the owner of, you may soon find that you will have to spend a large sum on renovation costs.
Same goes for investing in Forex (short for FOReign EXchange) If you do not properly do your homework, you are bound to lose a considerable amount of your investments. Very often all that you have invested. Sure, if it works for you and you understand what to look out for it could be very lucrative. There is a reason they say the largest returns come from the riskiest investments.
Fun Fact: Strongest currency at the time of writing this article, 30 May 2019, is the Kuwaiti Dinar (KWD).
Watch the video below to understand the question even better: What is passive income?