5 ms·

This is not passive income. This is asset appreciation. Dividends or rent collection qualify as passive income.

by fny 5y ago

nitsky 5y ago
These days, with stock buybacks, a portion of stock price increases are actually dividends.
RivieraKid 5y ago
It's effectively the same.
- sethd 5y ago
  It's only income if you sell, at which point it's no longer passive, right? Otherwise it's unrealized gains and not income.
  - Retric 5y ago
    Setting up a passive income by regularly selling stocks clearly qualifies. Unrealized gains are more questionable, but you don’t have to realize gains from other forms of passive income like rental income either.
- nly 5y ago
  It's really not. Let's say, thanks to your passive investment growth, you can spend 3% of your capital every year and never run out This means $100/mo of recurring, passive income would take $40K in the bank to replace. Even a small passive income is worth huge amounts.
antb123 5y ago
unfortunately everything that is above 2% interest in our zero yield environment takes some risk. However I agree. Best for me is EU crowd funding sites for real estate. Typical yield is 12-20%. So called "Hard money". Banks in europe don't touch this after the 80s blow ups. Nexo - popular in the crypto world takes the funds and puts them there (but keeps 2-3%) as well as payday loans for eastern europeans.
boardwaalk 5y ago
Can you explain why you differentiate the two (price changes vs dividends)? AFAIU it’s really just that you have to instruct one to be sold to realize it and the other just shows up in your account, but the overall returns, tax implications, and such are basically the same.
- nly 5y ago
  Not sure what jurisdiction you're in, but the tax implications are not 'basically the same' here in the UK. Capital gains are taxed at 20% and can be offset against personal losses, whereas dividend income is typically taxed at 32.5 - 38%, and that's after the company issuing the dividend already paid corporation tax of 19% on their end.
  - KptMarchewa 5y ago
    That's why accumulating index funds are better option.
    - nly 5y ago
      In the UK it doesn't matter. Even dividends paid inside an accumulating fund or ETF are still considered income and, if held outside of a tax sheltered account, you're supposed to (somehow) figure out how much income tax to pay and declare it. Most people get away with doing this because they use tax sheltered accounts, or the amount would be below their tax-free allowance. Ref: "Accumulation units – the income tax loophole that never was" - https://monevator.com/income-tax-on-accumulation-unit/ https://monevator.com/income-tax-on-accumulation-unit/
  - boardwaalk 5y ago
    The US. Where I believe cap gains taxes apply to both cap gains and dividends. Which honestly makes sense me — either you “cash out” individually or the company does it for you (to pay the dividend). From what you say, dividends seem like a negative thing taxes-wise, so why would any company opt pay them out? I’m sure there’s some intricacy there.
  - 5y ago

This is not passive income. This is asset appreciation. Dividends or rent collection qualify as passive income.

by fny 5y ago

This is not passive income. This is asset appreciation. Dividends or rent collection qualify as passive income.

nitsky 5y ago

These days, with stock buybacks, a portion of stock price increases are actually dividends.

RivieraKid 5y ago

It's effectively the same.

sethd 5y ago
It's only income if you sell, at which point it's no longer passive, right? Otherwise it's unrealized gains and not income.
- Retric 5y ago
  Setting up a passive income by regularly selling stocks clearly qualifies. Unrealized gains are more questionable, but you don’t have to realize gains from other forms of passive income like rental income either.
nly 5y ago
It's really not. Let's say, thanks to your passive investment growth, you can spend 3% of your capital every year and never run out This means $100/mo of recurring, passive income would take $40K in the bank to replace. Even a small passive income is worth huge amounts.

antb123 5y ago

unfortunately everything that is above 2% interest in our zero yield environment takes some risk. However I agree. Best for me is EU crowd funding sites for real estate. Typical yield is 12-20%. So called "Hard money". Banks in europe don't touch this after the 80s blow ups. Nexo - popular in the crypto world takes the funds and puts them there (but keeps 2-3%) as well as payday loans for eastern europeans.

boardwaalk 5y ago

Can you explain why you differentiate the two (price changes vs dividends)? AFAIU it’s really just that you have to instruct one to be sold to realize it and the other just shows up in your account, but the overall returns, tax implications, and such are basically the same.

nly 5y ago
Not sure what jurisdiction you're in, but the tax implications are not 'basically the same' here in the UK. Capital gains are taxed at 20% and can be offset against personal losses, whereas dividend income is typically taxed at 32.5 - 38%, and that's after the company issuing the dividend already paid corporation tax of 19% on their end.
- KptMarchewa 5y ago
  That's why accumulating index funds are better option.
  - nly 5y ago
    In the UK it doesn't matter. Even dividends paid inside an accumulating fund or ETF are still considered income and, if held outside of a tax sheltered account, you're supposed to (somehow) figure out how much income tax to pay and declare it. Most people get away with doing this because they use tax sheltered accounts, or the amount would be below their tax-free allowance. Ref: "Accumulation units – the income tax loophole that never was" - https://monevator.com/income-tax-on-accumulation-unit/ https://monevator.com/income-tax-on-accumulation-unit/
- boardwaalk 5y ago
  The US. Where I believe cap gains taxes apply to both cap gains and dividends. Which honestly makes sense me — either you “cash out” individually or the company does it for you (to pay the dividend). From what you say, dividends seem like a negative thing taxes-wise, so why would any company opt pay them out? I’m sure there’s some intricacy there.
- 5y ago