There are 3 types of income: active income, passive income and portfolio income.

Active Income says:
Income for which services have been performed. This includes wages, tips, salaries, commissions, and income from businesses in which there is material participation.

Passive Income

Wikipedia says:
Most types of passive income are derived from real estate/property, while other types of passive income are derived from royalties from patents or license agreements.
An income stream falling into this category is one where money is received usually on a regular basis, where no additional effort has taken place. Most passive income streams require great effort to start with.
Some examples: Interest Income paid from bank deposits, rental income from real estate/property., royalties from writing a book, dividends from shares holding.
Another example of passive income come from network marketing.’
Passive income flows to you or your family whether you are sick, or vacationing, or dead. Passive income streams allow you to make money without having to be there.

Portfolio Income

Portfolio income is income from investments, including dividends, interest, royalties, and capital gains. I would say that portfolio income is a subset of passive income.


Personal finance author and trainer

    7 replies to "3 types of income: Active, Portfolio and Passive Income"

    • balija anilkumar

      Lic and life insurance

      What type of income


      active incomes solve short term problems hence lengthen the long term burdens,
      Here is what to do,
      Stop saving because the much more money is printed daily
      Start investing each penny of your active income.
      Avoid investing in liabilities rather than real assets.
      be a good book keeper.

    • Andrew Leard

      So as a entrepreneur with a small business classified as a LLC, Im on the fence trying to make the push to be a individual who’s not earning a paycheck but making money off of my assists. I work a 5:30-2:30 am/pm shift for a large corporation to have income for the basics and insurance. How do I take my earned money and turn it into non taxable assets, or how do I transition into lessening the taxes? I want to get away from the mindset of relying on the job to take care of myself and family, and start growing my portfolio.

    • Relax

      When passive income break even with expenses, yay!

      when the passive income continues to curve up and gain sufficient surplus, that would be the right time to retire.

    • […] Chow says that when your passive income equals your monthly spending requirements, you are considered financially free. It doesn’t […]

    • […] Chow says that when your passive income equals your monthly spending requirements, you are considered financially free. It doesn’t […]

    • Tiat Leong

      I believe that we should build up our cash reserves via active income and then plough part of it back for passive income.

      Active is a very appropriate. We must do something… we must be proactive about it.

      Thanks for sharing.

      Warm regards
      P.S: We have a choice, to choose abundance or to choose scarcity. What’s yours?

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