Is Dividend Investing Truly Passive?

All these years, many financial gurus and YouTubers claimed that “there is no such thing as passive income”.  Their argument is simple- every form of income, whether from investments, property, or online ventures, requires some level of effort, attention, and maintenance.  To be fair, they are not entirely wrong.  However, from a Singapore context, I think it is worth taking a deeper look because to me, while no income stream is completely passive, some are sufficiently passive, and dividend investing fits that description quite well.

The Naysayers’ View - No Such Thing as Passive Income

Let’s start with the critics. Those who dismiss the idea of “passive income” often point to these realities:

1)     Initial Effort Required

Every “passive” stream starts with effort, including but not limited to learning, research, and capital accumulation.  Whether it is building a dividend portfolio or buying a rental property, there is a steep learning curve at the beginning.

2)     Ongoing Monitoring

Businesses evolve, markets change, and companies that once paid consistent dividends can suddenly cut them (recall Singapore Press Holdings, Manulife US REIT etc).  Investors who are completely hands-off may end up with declining assets or investments to be "written off".

3)     Emotional Involvement

Even if one do not do much daily, investors' emotions are still involved.  When the market corrects or dividends are cut, investors feel the pain and must decide whether to hold, buy more, or sell.

4)     Opportunity Cost of Time and Money

Capital could have been deployed elsewhere instead of leaving it in certain dividend stocks, waiting for dividend payouts.  So even “doing nothing” is an active decision.  That is why many say “no income is ever truly passive”.

From naysayers' lens, unless one is a trust fund beneficiary or receiving royalties from work done decades ago, some degree of management is always required.

The Supporters’ View - Dividend Investing is Sufficiently Passive

Now let’s look from a different perspective.  Supporters of dividend investing, myself included, argue that it is one of the most passive ways to generate income once the foundation is built.

1)     Dividends Come in Automatically

One do not have to collect rent, chase tenants, or worry about vacancy.  The dividends flow into your bank account at regular intervals, either quarterly, semi-annually or annually, with little effort.

2)     Minimal Maintenance Once Set Up

After building a diversified portfolio of strong dividend-paying stocks or REITs, there is little to do other than the occasional portfolio review or rebalancing.  Compared to running a business or managing properties, that is close to passive.

3)     Predictable and Recurring

Mature companies, banks and REITs with stable cash flows tend to provide consistent payouts.  This predictability allows investors like myself to plan their cash flow and even supplement their retirement income.

4)     Choice of Simplicity - ETFs

For those who truly want hands-off investing, the STI ETF or REITs ETF like CFA.SI or CLR.SI are excellent examples.  They automatically remove underperformers and include top performers, saving investors the trouble of tracking individual counters.

From this perspective, dividend investing is “passive enough” for most people, especially compared to the alternatives.

My Take - Passive Enough for a Meaningful Life

Personally, I believe dividend investing sits comfortably in the middle ground between hands-off and hands-on.

Indeed, it requires some monitoring.  I still track my individual dividend shares, review quarterly reports, and occasionally rebalance the portfolio.  However compared to managing rental properties (including dealing with repairs, taxes, tenants and even agents) or trading growth stocks that demand constant news-checking and chart analysis, dividend investing feels very passive.

To me, the whole point of pursuing “passive income” is time freedom, gaining the ability to live life on your own terms without being tied to active work or constant stress.  Dividend investing gives me that.  I can enjoy my coffee, spend time with family, and still know that my money is quietly working for me in the background.

If I ever want to make it even more passive, I can always shift more of my portfolio into ETFs in future.  However currently, I still prefer to have some control, to select companies I believe in, to understand their businesses, and to feel that sense of ownership.

So, is dividend investing truly passive?  Maybe not 100%, but in the real world, where every form of income requires some level of engagement, I would say that it is passive enough, especially for those who value simplicity, stability, and freedom over chasing the next big thing.

Final Thoughts

The debate over “passive income” will probably never end, but perhaps the key is not whether something is truly passive, instead it is whether it allows you to live the life you want with minimal stress and sufficient returns.  I would like to end this blog with this video for anyone interested in this topic.  The video gave a different perspective, and the biggest takeaway from the video is "how much you spend" is much more important than "how much passive income you get" in the pursuit of freedom and stability that passive income chasers aim to achieve.

For me personally, dividend investing ticks that passive box perfectly.  Barista FIRE, here I come...!