Thank you everyone for replying. I ended up buying M-Audio AV40 instead of passive speakers to get my feet wet first. I definitely see myself upgrading within a year or so because I can use another set. I still think that passive speakers are the way to go in terms of selections and being able to independently upgrade single component at a time.
Unless I come back with ~$1000 budget, it doesn't seem like I can get quality speakers without having any components. Since I have a set of active speakers coming in tomorrow, I need to look out for a sub that should last over couple years. I am trying to avoid spending money on multiple components at the same time (i.e. purchase speakers separately from other non-speaker components like DAC and amp...that's it I think(?)). Some questions to help me sort out my purchase path:
-Do active speakers take any advantage of external amps as if they are passives? For example, getting an amp for M-Audio AV40 + sub setup. This sound pretty stupid IMO since active speakers don't need amp (i.e. built-in already) but not sure if there are any advantages. What about external DAC? Any use in connecting with AV40?
-Like StratocasterMan linked, if I go after speakers like KEF Q300, am I safe to assume that I should go with external DAC rather than sound card?
In the end, I need sub, DAC, amp, and ... better speakers. I think the correct path is to get the sub, then DAC, and amp & upgrade speakers. What's the general breakdown of % spent on each component? I know for computers, GPU, CPU, then everything else follows in terms of % spent on components.
IMO, spend most of your money on speakers and an amplifier. Those make a bigger difference than a dac.