What is Passive Income?
Passive income refers to the earnings generated with minimal effort on the part of the recipient. It is often associated with investments that yield returns over time without requiring a continuous active involvement.
Passive Income in the Stock Market
The stock market is a popular avenue for generating passive income. This can be achieved through various investment strategies that allow investors to benefit from their capital without extensive hands-on management.
1. Dividend Stocks
Investing in dividend-paying stocks is one of the most common methods. Companies that generate profits often distribute a portion to shareholders, providing a steady income stream that can be reinvested or used for personal expenses.
2. Index Funds and ETFs
Exchange-Traded Funds (ETFs) and index funds also offer a form of passive income. These funds typically track a specific index and can pay dividends, providing returns without the need to select individual stocks.
3. Real Estate Investment Trusts (REITs)
REITs allow investors to earn income through real estate without owning physical properties. They offer dividends from rental income and appreciate in value over time.
Conclusion
Passive income from the stock market can be an effective strategy for building wealth and achieving financial freedom. Careful selection and management of investments can lead to sustainable income streams with limited ongoing oversight.