So you may have heard investors talking about their “portfolio income”.
It may sound like a bit of a jargon term but really it’s exactly the same as passive income.
Portfolio income is money earned in a similar way to passive income investments, but with a few key differences. These can include things like shares, capital gains and royalties for property investments.
Unlike passive income investments, portfolio income does not come from regular business activity.
In fact, portfolio income is the third type of income you can create, along with active and passive income.
So how can you increase your portfolio income?
There are many ways to increase your portfolio income.
Two of the main ways to do this involve dividend stocks.
the first way is to purchase high paying dividend stocks. These are very similar to ordinary stocks but the difference is that they pay above average. The great thing about this type of investment is that businesses raise the dividend payout as profits increase.
On the flip side though, payments are also reduced when profits are down in the company.
As a shareholder in the company, dividend payments can be made directly to you. And you can also purchase additional shares in the company if you want to increase your annual return on investment.
The second way to grow your portfolio income is to invest in dividend exchange-traded funds. Just like the previous strategy ETF’s focus on high-paying dividend stocks.
What makes ETF’s different is that they specifically track the highest paying dividend stocks in the market. They also take into account the number of times a business has paid consecutive dividends to their shareholders. This helps you find the best dividend stocks to invest in without having to look for yourself.
The sad side of portfolio income
The downside to portfolio income is that investing in dividend stocks usually won’t yield huge gains, despite the high-paying nature of these investments.
Typical returns for these type of investments don’t go above 5%, which means you’ll need a significant chunk of cash if you want to approach anything respectable.
This is why portfolio income is typically an investment strategy used by people that have multiple five or six-figure sums to invest.
Before getting started with portfolio income
If you’re new to the world of active, passive and portfolio income, you’ll want to focus on building your passive income streams first. Passive income is the ticket to financial freedom. And typically, you can leverage your active income to create a passive income business or some form of investment that will produce long-term returns for you.
One of the fastest ways to earn passive income is to start a business.
Granted, starting a business certainly isn’t passive at the start but eventually, it can be transformed into something that creates passive income for you.
In many cases, a business can be systematised our outsourced so you don’t need to be directly involved. Some online business models (like affiliate marketing) are perfect for passive income as the internet makes it possible to set up systems that work for you.
As an affiliate, you can promote products and services from other people and companies. So you don’t need to spend all that time coming up with something yourself. Many bloggers promote products through affiliate marketing and make amazing passive income doing it.
Rounding things off
You should now understand the how portfolio income fits into the investments space. If you’re just getting started, you’ll want to focus on creating passive income. But if you’re someone who’s built up some capital, portfolio income can be a great way to grow your streams of income further.