Passive income is money arriving without you working for it. For €1,000 a month at a 4% return you need roughly €300,000 in capital.
That figure is missing from nearly every article on the subject, and it's the only one that really matters. Passive income isn't a technique but arithmetic: you need capital, or you've done work that keeps paying.
What it costs in capital
The formula is simple: desired annual income divided by your return.
| Per month | Per year | At 2% | At 3% | At 4% | At 5% |
|---|---|---|---|---|---|
| €250 | €3,000 | €150,000 | €100,000 | €75,000 | €60,000 |
| €500 | €6,000 | €300,000 | €200,000 | €150,000 | €120,000 |
| €1,000 | €12,000 | €600,000 | €400,000 | €300,000 | €240,000 |
| €1,500 | €18,000 | €900,000 | €600,000 | €450,000 | €360,000 |
| €2,000 | €24,000 | €1,200,000 | €800,000 | €600,000 | €480,000 |
With a savings account returning less than inflation it doesn't work: your real return is negative and you're eroding your capital without noticing.
How long does it take to build?
For €1,000 a month, so €300,000 at a 4% real return, from zero:
| Contribution per year | Duration |
|---|---|
| €3,000 | 41.0 years |
| €6,000 | 28.0 years |
| €12,000 | 17.7 years |
| €24,000 | 10.3 years |
This is why passive income is rarely a fast route. It's largely a function of how much you can contribute, not which clever method you pick.
What's genuinely passive and what isn't
The term is used broadly, and most applications don't earn it. An honest sorting.
Genuinely passive:
Dividends and price growth from investment funds. You buy once, you reinvest or withdraw, and beyond that there's nothing to do.
Bond interest. Same principle, lower return, less fluctuation.
Semi-passive:
Property rental. Rent arrives without you working, but there's maintenance, vacancy, administration and occasionally a tenant who doesn't pay. Expect a few days a year per property, and more when it goes wrong.
Royalties on something you made. Passive in the payout, but an enormous amount of work came first.
Not passive, despite the promise:
Dropshipping, print on demand, affiliate blogs and most "digital products". These are businesses. They can work well, but they demand ongoing attention, and when you stop working the income usually stops too.
For illustration, rough estimates of time invested:
| Route | Setup hours | Hours per year | After three years |
|---|---|---|---|
| Blog with affiliates | 400 | 500 | 1,900 |
| Dropshipping | 800 | 300 | 1,700 |
| Print on demand | 250 | 200 | 850 |
| Global ETF | 2 | 0 | 2 |
That last row isn't a joke. Buying a diversified index investment costs a few hours of research and then virtually nothing.
That doesn't mean running a business is bad. It means it isn't passive income, and comparing the two misleads you.
The dividend trap
Anyone aiming at passive income arrives quickly at dividends. And that's where it often goes wrong, because a high dividend isn't the same as a high return.
| Type | Dividend | Price growth | Total |
|---|---|---|---|
| Global ETF, accumulating | 0% | 7% | 7% |
| Global ETF, distributing | 2% | 5% | 7% |
| Dividend fund | 4% | 3% | 7% |
| High-dividend fund | 7% | 0% | 7% |
Dividends don't come from nowhere. What a company pays out is no longer in the price. At equal total returns the split makes no difference to your wealth: €100,000 grows to €386,968 over twenty years regardless of whether that return came from dividends or price growth.
What it does change: distributed dividends are immediately available and accumulating ones aren't. That's an advantage when living off your wealth, and a disadvantage while accumulating because you have to reinvest yourself.
And one practical warning: funds with strikingly high dividend yields sometimes pay out more than they earn, which means you're getting your own capital back and mistaking it for income.
The most passive income you'll get is your state pension
This is the point structurally absent from Dutch articles about passive income.
The state pension is income arriving without you doing anything, guaranteed by the government, indexed, and lifelong. That's the definition of passive income.
What it's worth in capital:
| At a return of | €18,000 of state pension equals |
|---|---|
| 3% | €600,000 |
| 4% | €450,000 |
| 5% | €360,000 |
And with an occupational pension of €12,000 alongside, that €30,000 a year corresponds to €750,000 of capital at 4%.
For most Dutch households that's considerably more passive income than they'll ever build themselves. It just arrives late, from state pension age, and that's precisely why the preceding years are the problem. How that calculation works is in the article on your FIRE number.
What that means for your plan
Three conclusions follow.
You need less than the table suggests. If you want passive income in order to stop working, you needn't fund your full spending from capital. From your state pension date the state takes over a large part. You need capital for the years before, and a top-up afterwards.
Your savings rate weighs more than your route. Going from €6,000 to €12,000 a year roughly halves your timeline. No method approaches that effect.
A second income isn't passive income. That's fine, and it's useful: every extra euro can go into your contributions. But don't call it passive income, because then you're comparing two incomparable things.
What works when you have little capital
Honestly: building capital.
That's an unsatisfying answer in a subject full of faster promises, and it's the only thing that works consistently. The routes presenting themselves as passive while requiring little capital demand time instead, usually more time than a job.
What does help while accumulating:
Lowering your spending. That raises your contributions and lowers your target. Double effect, and entirely within your control.
Cutting costs. A fund fee of 0.2% rather than 1.5% saves tens of thousands over thirty years. That's the most certain return available.
Reinvesting. Every distribution you take while accumulating never compounds. That mechanism is set out in the article on compound interest.
How Gylder fits in
Tracking passive income is harder than it looks, because it arrives from different sources at different moments.
Gylder tracks your received dividends per position and shows your expected annual income including a payout calendar. It also totals your wealth daily, so you can see how far you are from the figure in the table above.
And because your spending is categorised automatically, you know the figure the whole calculation rests on: how much passive income you actually need.
What this doesn't tell you
The time estimates are rough. The hours in the business-route table are indications based on commonly reported experience, not research. They show the order of magnitude.
Wealth above an exemption is taxed annually, and withholding tax is deducted from dividends. Both reduce your net yield and belong inside the real return you calculate with.
Returns aren't guaranteed. The percentages here are historical averages over long periods, with interim falls of tens of percent.
This isn't advice. Which approach suits you depends on your situation and risk tolerance.
Frequently asked questions
How much capital do I need for €1,000 a month of passive income? At a 4% return, roughly €300,000. At 3% it's €400,000 and at 5% €240,000.
What's the best form of passive income? Diversified investing demands the least time per euro of yield. Rental and business can produce more, but aren't passive.
Can I build passive income without starting capital? Not quickly. Contributing €3,000 a year, €1,000 a month takes over forty years. The routes requiring no capital demand a great deal of time instead.
Is a high dividend better? Not automatically. What a company pays out is no longer in the price. At equal total returns the split makes no difference to your wealth.
Does my state pension count as passive income? Yes, and it's the most passive you'll get. €18,000 a year corresponds to €450,000 of capital at 4%.