How I’m planning to turn just £5 a day into a passive income

first_imgHow I’m planning to turn just £5 a day into a passive income Don’t miss our special stock presentation.It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.That’s why they’re referring to it as the FTSE’s ‘double agent’.Because they believe it’s working both with the market… And against it.To find out why we think you should add it to your portfolio today… Simply click below to discover how you can take advantage of this. Many investors dream of being able to live off a passive income stream from their stocks and shares. It is not as hard to hit this target as it might first seem. I believe all you need to achieve this goal is a set savings and investment plan, as well as a little bit of patience. 5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Indeed, by following these rules, I reckon it’s possible to build a passive income stream with an investment of just £5 a day. Passive income streamThe first stage on any passive income journey is to build a large savings pot. The best way to do this is to invest in the stock market.Over the past 35 years, UK blue-chip stocks have produced an average annual return for investors of around 8%. Equities have yielded this long term average return even though the market has dropped approximately 50% on two occasions. As such, I think it’s highly likely this trend will continue in future.That’s why I believe it is possible to turn an investment of just £5 a day into a financial nest egg large enough to produce a passive income. An investment of £5 a day, is worth roughly £152 a month or £1,825 a year. According to my calculations, this level of investment could achieve a final investment value of £534,000 over four decades. Doubling the investment to £10 a day or £304 a month, could see an investor achieve a nest egg worth £500k in 30 years. Investing for incomeAfter building a large savings pot, the next stage is to invest for income. There are plenty of options to choose from. The FTSE 100 currently supports an average dividend yield of around 4.4%. However, some companies in the index yield as much as 9%. I think the best approach could be to build a diversified basket of blue-chip income stocks. Based on the current yields available from stocks such as Phoenix Group, GlaxoSmithKline and mining giant BHP, I reckon it’s possible to achieve an average dividend yield of around 6%. On a lump sum of half a million pounds, this implies a potential passive income of £30k a year. If held in a Stocks and Shares ISA, this income would be tax-free. Plenty of optionsInvestors have plenty of options to generate a passive income stream. Saving £10 a day for 15 years could yield a savings pot of £100k. By investing this money in the high-yield blue-chip income stocks highlighted above, investors may be able to achieve a passive income of £6k a year. So, that’s how I’m planning to turn an investment of this £5 a day into a passive income stream. Any investor can follow a similar path, all it takes is a little research and patience. Considering the potential rewards from following a long-term strategy, such as that profiled above, the extra effort is almost certainly worth it in my opinion.  Rupert Hargreaves owns no share mention. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Enter Your Email Address Image source: Getty Images center_img Our 6 ‘Best Buys Now’ Shares There’s a ‘double agent’ hiding in the FTSE… we recommend you buy it! Rupert Hargreaves | Saturday, 10th October, 2020 Click here to get access to our presentation, and learn how to get the name of this ‘double agent’! I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Rupert Hargreaveslast_img

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