As the name suggest, this income comes from your portfolio of investments. In a way, it is kind of an active income because it requires the activity of buying and selling to generate the income. Most of the time, in the world of investment, this income can also be known as stock trading income or capital gains.
In my financial journey, I was once totally reliant on portfolio income as I was a full time trader in the stock market. When you are trading full time, the pressure to buy and sell is great because my bills and family expenses presented itself with precision timing every month.
Although I still trade today, I am no longer under the pressure to generate income through trading even if the setup is not there. I will only trade when the market conditions are right.
I have noticed that there is a big confusion on the word investing and trading. Traders think they are investors. Let me tell you this, trading is not investing as trading is merely the act of buying something with the intention of marking up and selling at a higher price. The difference between the buy and sell price is the profit margin. In the stock market or property market, this may be called capital gain.
Understanding the definition of trading and investing is important because it outlines the financial objective. Of course, trading profit or portfolio income is an important component for any financial plan. What I am saying is that it should never be the only source of income.
If it is, it is time to build on, in my opinion, the most important income type in your financial journey. To be financially free, you must, and there is no other way, have passive income.