The income that is generated by a paper asset, specifically from the performance (income and capital changes) of its underlying asset. Portfolio income is by nature a source of earnings that may not require a lot of efforts. Paper assets include stocks, bonds, insurance, annuities, traded funds (exchange-traded funds, ETFs), mutual fund shares (and broadly financial securities). A fiat currency that is issued by a creditworthy government, and hence is used as a reserve currency, is also a paper asset (e.g., US dollar, euro, etc.)

Portfolio income represents earnings/ proceeds received from investments and assets in the form of dividends, interest, and capital gains. Royalties received from investment property also are considered a source of portfolio income.

Portfolio income represents capital gains that arise from buying paper assets at a lower cost or price and selling them for a higher price, with the difference being the capital profits. In reality, an investing style capitalizing on paper assets is much more a way of trading (rather than investing), because it focuses on buying and selling at two different points in time. This type of income is taxed at much lower rate compared to earned income (usually, 20% vs. 50%) and hence is considered a better level of income generation that comes with certain benefits.

Individuals who are typical to make this type of profits (portfolio income) are at a professional advantage to earners of “earned income” in terms of their ability to work on their own business (self-employed) and to directly apply their professional knowledge and know-how.

Portfolio income is one of three main categories of income (active income, passive income and portfolio income). Portfolio income is characteristically a type of gross income arising from interest, dividends, annuities, or royalties not generated in the ordinary course of a trade or business.