Some sources of passive income are:
- Owning a part of a company which generates profit (which hopefully will keep generating profit and not go bankrupt)
- Owning something you can rent to someone (which hopefully will stay in the shape that someone would want to rent it without requiring more money from you to maintain it than you get in rent)
- Owning an intellectual property others would (hopefully) pay to use.
Ownership in a company can be in form of stocks (which either increase in value or pay dividend) or in form of an inactive partnership (you gave money to someone else so they can start their business, but you do not actively take part in its daily affairs besides getting a part of the profit). If you decide to play the stock market game, then I would recommend you to not invest in individual stock but rather invest in an index fund. Yes, there are people who actually make money with day trading. But if you want to do that in a way which actually makes you money and isn't just gambling, then you need to spend so much time monitoring stock prices and business news that it's not really a passive income anymore. And index fund, on the other hand, is an asset you can just buy and then not think about until you need to turn it back into money. At which point it should hopefully be worth more than you paid for it (it might be less because the stock market is currently in a temporary crisis, but it usually doesn't take long to recover). If you want to use an index fund as a source of passive income, then you would invest $x in it, check on its value occasionally, and when it happens to be much more than $x, you sell so much of it that its value is back to $x.
Owning something you can rent usually means real-estate (but you might find other things you could rent out if you are creative). If you do not want to invest the capital to buy a whole apartment, then there are real estate funds. You basically buy a share in a real estate property (or a portfolio of many) which entitles you to a part of the rent it generates. This allows you to generate passive income through real estate with a lot smaller initial investment.
An intellectual property could be either something you created yourself or something you bought the rights to and which people would pay to use in the future. Examples could be:
- A song
- A book
- A stock photo
- A video
- An app or video game
There are websites for each of these which allow you to just upload them and then receive a part of the revenue they generate (in form of sales or advertisement).
The good thing about these kinds of passive income generators is that they are the only ones I could think of which allow you to generate a passive income without actually investing any money. You would invest your own time and special skills to create these assets.
But the disadvantage is that it usually requires quite a lot of skills and creativity to create intellectual property which is good and appealing enough to generate any passive income at all. And even when you happen to have those skills, then it is very difficult to predict how much income these assets will generate. They might for some reason become amazingly popular or (statistically far more likely) get just a handful of sales. It's also hard to tell if they will keep generating much revenue in the future. They could become timeless classics which generate money for the rest of your life or (again, far more likely) be completely forgotten a couple months after release.