In contrast to other financial investments like real estate, it's relatively easy to generate passive income in the stock market. Putting money into dividend stocks will deliver instant cash flow in the form of regular quarterly payments. There's essentially no effort on your part, either, after making your initial purchase.

There are dozens of well-known stocks that have long histories of making annual increases to their payouts. As a result, if an initial dividend payment seems small, investors may see that income stream grow over the years.

Yet some investors are deterred by the prospect of purchasing individual stocks that are subject to huge price swings at any time. That's where owning a basket of these stocks through an exchange-traded fund (ETF) comes into play.

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Source Fool.com