What is portfolio income?

Portfolio income refers to the income earned from investments such as stocks, bonds, mutual funds, and real estate. It is distinct from earned income, which is generated through labor or active participation in a business. Portfolio income may be generated through capital gains, interest, dividends, or rental income.

Capital gains refer to the profit earned from the sale of an asset such as stocks or real estate. If an investor buys a stock for $100 and sells it for $120, they have realized a capital gain of $20.

Interest income is earned when an investor lends money to an individual or organization and receives interest payments in return. This can include investments in bonds or savings accounts.

Dividend income is earned when an investor owns shares of a company that pays dividends to its shareholders. Dividends are a portion of the company's profits that are distributed to shareholders.

Rental income is generated when an investor owns real estate that is rented to tenants. This income can be a source of steady income for investors.

Portfolio income is an important component of an investor's overall financial strategy as it can help to diversify their income streams and mitigate risk. However, it is important for investors to carefully consider the potential risks and rewards of each investment before making any decisions.