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A typical example of active income is a nine-to-five job: we work – either physically or mentally – and receive regular compensation for it. Either at the end of the month in the form of a salary or at the end of a project by invoicing. Passive income, on the other hand, refers to income that is generated with little or no ongoing effort. Unlike active income, where time is directly exchanged for money, passive income is generated by investing in assets. Classic examples include rental income, dividends or royalties from intellectual property such as patents.
In summary
Passive income: for big and small wishes The advantage of passive income is that it enables investors to diversify their sources of income and reduce dependence on traditional employment
Of course, anyone who wants to live entirely off dividends, interest income and capital gains will need significant assets invested in the capital markets. Even though many people on average incomes are unlikely to fulfill this wish. However, even with smaller amounts, investors can generate passive income –to pay for a gym membership, a streaming subscription or to supplement their pension in retirement. The key is to invest your capital - whether it’s from a maturing savings plan, a life insurance payout or an inheritance - rather than leaving it in their current account or under the pillow.
Even with less capital, investors can earn passive income – and use it to finance gym membership
Retire earlier
Thinking about retiring early but worried about finances? You might without knowing it – be a supporter of the FIRE movement. FIRE stands for Financial Independence, Retire Early. Passive income plays a key role here by helping to “fuel” your retirement, so you can stop working sooner without compromising your quality of life.
FIRE?
Suitable solutions for different life stages
More money for leisure:
Emilia, 30 years old, invests 12,000 euros in an equity fund with a monthly distribution of 0.5%. She receives 60 euros each month which comfortably covers her gym membership.2
More money in retirement:
Rainer, 65 years old, received 100,000 euros from a life insurance policy. He decides on a multi-asset fund with a monthly distribution of 0.3%. This means he receives 300 euros each month in addition to his pension.2
— Denise Kißner, Head of Product Specialists and Campaigns at DWS
Flexibility with little effort: monthly distributing funds
Passive income isn’t just for experienced investors. Beginners and younger investors can also take advantage of it. But which investments are suitable? One simple and flexible option is monthly distributing funds. In addition to their goal of generating regular capital income for investors, they offer professional management – that is, the portfolio managers take over the analysis and selection of the individual investments in the fund.
But how exactly do the monthly distributions work? A fixed percentage of the fund assets is distributed to investors each month. The amount distributed depends on the investment strategy and the performance of the respective fund. Since the value of the fund can not only rise but also fall, the distribution yield achieved can also vary from month to month.
What else is important to know?
Unlike private pension insurance or payout plans, monthly distributing funds aim to preserve the original investment as much as possible over the long term. To achieve this, the products are designed to maintain the initial investment while generating monthly payouts funded by capital gains, interest and dividends. This allows for steady income generation without eroding the principal investment.1
Investors can choose the fund that best suits their personal risk appetite and investment horizon from a wide range of options. Monthly distributing funds are available for the following asset classes:
1 Equity funds
investing in company shares. They offer comparatively high potential returns, but also involve higher risk.
2 Fixed Income funds
invest in fixed-interest securities such as bonds. They are generally less risky than equities, but also offer lower potential returns. Their advantage: better planning due to fixed coupons.
3 Multi Asset funds
combine different asset classes such as equities, bonds and commodities. They aim for a balanced mix of risk and return.
4 Liquid Real Assets funds (LRA)
investing in real assets such as real estate and infrastructure stocks, which can help to reduce volatility and diversify the portfolio.
At a glance: monthly distributing funds
Regular income
Investors receive a regular capital income and can benefit from potential price gains, interests and dividends.
Professional management
DWS investment experts implement the respective investment strategy and adjust it to market developments.
Flexible investment strategy
DWS product range offers solutions for different investor needs – from safety to growth.
Transparency & Availability
Transparency and liquidity through daily pricing – sale of fund units at daily net asset value possible.
Fluctuating distributions
The amount of distributions depends on the monthly net asset value and can vary depending on the fund performance.
No compounding effect
The regular distributions reduce the effect of compound interest compared to accumulating products.
From equities to multi-asset: These DWS funds distribute monthly
| Funds Name | ISIN | Asset Classes |
| DE0009848119 | Equity funds | |
| LU1616932940 | Equity funds | |
| LU3021212066 | Equity funds | |
| LU3011703512 | Equity funds | |
| LU3004051697 | Equity funds | |
| LU2632499682 | Equity funds/LRA | |
| LU0599946893 | Multi-asset funds | |
| LU2034326236 | Multi-asset funds |