Investing Made Simple by Uncle8888 (34)

Read? Investing Made Simple by Uncle8888 (33)

Read? Active Income and Passive Income

What is passive income?

Passive income is money received on a regular basis, with little effort required to maintain it.

The three key words: regular, little effort. and maintain

What is active income?

Active Income will require significant effort and time to acquire with services performed.

Simply, it just means that we have to frequently use our human asset, significant effort and time to get the payouts from these activities. The frequency to execute these activities is often measured in term of minutes, hours, days, or week to receive the expected financial rewards.

What is passive income from stocks?

The conventional and traditional wisdom on passive income is based on these three key words: regular, little effort, and maintain will lead retail investors to think of dividend play stocks and especially S-REITs for their high yield - Can recommend some high yield dividend stocks for passive income?

What is regular???

Most retail investors will define "regular" to mean receiving cash flow from stocks in the form of stock dividends or cash DPUs via quarterly, semi and annual basis.

What is passive income from stocks?

Most retail passive income investors will refer to stock dividends and cash DPUs as primary source of passive income from stocks and realized gains from stocks as passive income is hardly found in their investing dictionary.

What is cash flow from stocks?

Cash flow from stocks can come from either or both (1) stock dividends/DPU AND (2) realized gains from partial or full divestment of stocks.

What is really passive income from stocks?

Please read again the above question.

If we may personally want to re-define passive income from stocks to mean:

To receive cash flow from stocks with little effort required to maintain it. (This definition will almost exclude you from becoming an active trader who will need lots of effort and close attention to profit from short-term market and stock price movement)

By removing the time element from this definition of passive income from stocks and focusing on little effort required to maintain it, you may flip your investing mind to revise your investing strategies for a mixed portfolio over long-term investing to meet your investing goals and avoid falling into dividend traps.

Read? Current Dividend Yield is good but avoid falling into potential Dividend Traps (5)

It is especially true for the younger investors in their 20s, 30s and may be even for early 40s. (as Uncle8888 also started quite late in getting very serious in the stock market)

Get it???