New Delhi: Passive income is a great way to generate some additional cash flow over and above your regular income. When you are able to generate a permanent source of passive income then it means you have achieved financial freedom. The importance of having a passive income was felt more during the initial period of Covid pandemic when millions of people lost their jobs. But as the name suggests, there is nothing called a passive income. You have to put in serious efforts to create a permanent source of passive income.
In the early nineties, the best source of passive income was interest income as interest rates on bank fixed deposits were in lower double digits. It used to give you a regular source of income while ensuring protection of your capital. But gradually fixed deposits lost their attractiveness as interest rates in the economy came down.
But as interest rates came down people started owning multiple properties to create a stream of rental income. When young Indians started working in foreign countries and earned in dollar, they repatriated part of that income back home. Elderly parents used that income to own a second or probably a third house, which helped them generate rental income.
During the early 2000s, many IT professionals who worked abroad owned multiple homes in India that gave them good rental income. But after the real estate boom when property prices started correcting, owning properties was not that attractive. Some people also lost money as builders could not complete housing projects even 5-10 years after the promised date.
The smarter investor then started discovering the stock market route to create a passive income. Earlier high dividend earning PSU stocks were the most favourite of investors as it was giving FD-like dividend income. But in the long term these PSU stocks did not perform well, leading to erosion of capital for many investors. Then the focus turned to growth stocks as top-performing companies does not offer much dividend income rather they plough back that profit in their business to grow it further. Capital gains far exceeded dividends as a source of income from equity. Mutual funds which were earlier forced to distribute their income as dividends now offered a growth option that enabled the money to grow.
But now in the digital era, the best source of passive income is through content creation on digital platforms like YouTube. On YouTube you can earn based on your views of your content. Artists like singers, dancers, musicians and those who have managed to attract viewers through their videos earn a good amount of money. Even housewives and grannies are making money by showing the world their cooking skills. A long genre of topics, from home improvement to photography, travel and tourism to adventure sport, films, art, music and a million other things are now produced and published as videos. They earn a steady source of income for the content creators.
But the markets for passive incomes have only just begun to bloom and grow spectacularly. Ask the creators of content on YouTube and the publishers of books on Amazon and they will have many stories to tell. The ability to earn for pages, views and through tie ups with product manufacturers has led to a deluge of content. Housewives and grannies have been woken up to come and make some money, showing the world how traditional food is made in their households. A long genre of topics, from home improvement to photography, travel and tourism to adventure sport, films, art, music and a million other things are now produced and published as videos. They earn a steady source of income for the content creators.
Affiliate marketing is another source of earning passive income in the digital era. With affiliate marketing, website owners, social media influencers or bloggers promote a third party’s product by including a link to the product on their site or social media account or in their videos on YouTube.
When a visitor clicks on the link and makes a purchase from the third-party affiliate, the site owner earns a commission. When viewers on your site grow then this commission income can be significant.