Active Income Type Two: Self-employment Income

This is the third article in this week’s series that began March 26, 2007 with the article entitled “Active vs Passive Income”.

If your method of trading/investing requires you to put in time doing anything to generate income and you only get paid when your gross profits exceed your losses, then you have self-employment-type income. A basic feature of this type of income is that it flows only when you spend your time doing something and the flow immediately stops when you stop spending your time doing something. Another basic feature is that you could be spending a lot of time doing something and still not get paid.

Hands-on day traders have self-employment type income. They have to be doing something to get income. When they stop doing it, their income stops. Also, despite putting in long hours, they still might not get paid (when their gross income is less than their losses).

The book Cash Flow Quadrants says that self-employment income is the second worst type. But surely, it’s worse than employment income because it depends on turning a net profit and because of the lack of perks.

continued tomorrow ...

Copyright 2007 Raymond T. Lee. All rights reserved.
Leisurely e-Mini Futures Trading
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