Portfolio income is the earnings generated from investments in financial assets such as stocks, bonds, mutual funds, real estate investment trusts (REITs), and other securities. It includes dividends, interest, and capital gains. This type of income is often considered passive, as it does not require active labour or daily involvement like earned income.

Dividends are regular payments made by companies to shareholders from profits, while interest income is earned from lending money through instruments like bonds or savings accounts. Capital gains occur when an asset is sold for more than its purchase price. These gains can be short-term or long-term, depending on how long the asset was held.

Portfolio income plays a vital role in wealth-building strategies. Many investors focus on building diversified portfolios to generate a steady income stream while minimising risk. Unlike earned income, portfolio income may be taxed differently, often at lower rates depending on the country’s tax system.

This type of income is essential for achieving financial independence, especially during retirement, as it can replace or supplement active earnings. By reinvesting portfolio income, individuals can benefit from compounding returns, which further accelerate long-term growth. Smart investing, risk management, and financial literacy are key to maximising portfolio income effectively.