Wednesday, November 5, 2008

Wiki's Definition of Passive Income

A Brief Introduction to Passive Income

Passive income is a rent received on a regular basis, with little effort required to maintain it. It is advocated by some authors, especially by Robert Kiyosaki.

Some examples of passive income are:
Repeated regular income, earned by a sales person, generated from the payment of a product or service that must be renewed on a regular basis, in order to continue receiving its benefits - also called residual income.

Rental from property;

Royalties from publishing a book or from licensing a patent or other form of intellectual property;

Earnings from internet advertisement on your websites;

Earnings from a business that does not require direct involvement from the owner or merchant;

Dividend and interest income from owning securities, such as stocks and bonds, are usually referred to as portfolio income, which can be considered a form of passive income;

Passive income is usually taxable. The American Internal Revenue Service defines passive income as "any activity... in which the taxpayer does not materially participate." Other financial and government institutions also recognize it as an income obtained as a result of capital growth or in relation to negative gearing.

The Interent Revolution

Edward de Bono in his book Handbook for the Positive Revolution states that "at some point value must be created in order to be distributed and enjoyed." [2] There is a lot of real value on the Internet, and a lot of it is free to any websurfer. There is value in free information, free education, free entertainment, free socialization, and social interaction platforms. Since the beginning of the commercialization of the Web, entrepreneurs have been trying to find viable business models of selling the web content and services. [3] Some of the problems of selling the online content can be attributed to high cost of software, high cost of qualified labour, expensive equipment, office space etc. These can be minimized in one person operations which use free software and have very small business overheads. In such cases, even a relatively modest income, together with frugal lifestyle, might be sufficient enough to form a basis for a viable passive income model.

An Emerging Industry

With the advent of Web 2.0, the concept of a passive income became a nucleus of an informal grassroots, (bottom up) movement and an emerging cottage industry of loosely coupled, independent individuals, who use a combination of their life story, personality, interests, and practical knowledge, to produce an engaging content and an alleged passive income. Appearing honest, transparent, and promising nothing, these individuals report in their blogs, podcasts or websites, their income sources, methods and strategies they use, to any reader or listener, without any additional requirements. There are no registration, subscriptions, or any other kind of fees. They claim to obtain their income mainly through advertising, remuneration for referrals and recommendations, and through donations from appreciative readers. Steve Pavlina represents but one example of such activities; although, it is not clear how long a passive income generated in such manner can remain so without any interventions, addition of new material, or site maintenance. The long tail effect could partly explain survival potential of such one person or family businesses.

1 comment:

  1. If you would like a tool to manage your small business activities and Projects, you can use this web aplication:

    You can use it to manage and prioritize your Goals (for business but also in other areas of your life), Projects and Tasks. It has a Checklists section, for the routines and repetitive activities that any business has to do. Also, it features a Schedules section and a Calendar, for scheduling you time and activities.

    Some features from GTD are also present, like Contexts and Next Actions.

    And it's available on the mobile phone too, so you can access it from anywhere.


Popular Posts