Here’s how the dividend income on a capital investment of 10k grows when compounded annually at 7%, using the formula:
A = P \cdot (1 + r)^t
Where:
P = 700
r = 0.07 (7% annual interest)
t is the number of years
If you have longer to compound
Reaching 53%, you have to allow for inflation and any for any years when the dividend yield is under 7% but you will have years like now when the dividend yield is above 7%. On the capital invested, the dividends should gently increase and you will get the yield on your buying price not the current headline price.
Near-zero savings ? Start building wealth with Warren Buffett’s golden method
Learning these Warren Buffett tips can help investors potentially become significantly richer in the long run, especially when starting early.
Posted by Zaven Boyrazian, CFA
Image source: The Motley Fool
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice.
Warren Buffett is one of the most successful stock market investors in the world, with a net worth of almost $150bn. That’s despite starting out with only around $2,000.
Throughout this journey, he’s been quite a vocal teacher, offering powerful advice over the years to guide the next generation of investors. And while the economic landscape’s very different in 2025, Buffett’s method remains a proven strategy for building long-term wealth, even when starting with little-to-no savings.
Focus on the business
In the short term, the stock market can feel a bit like a casino with prices jumping up and down almost randomly. But in the long run, shares ultimately move in the same direction as the underlying business.
So long as the company’s able to grow and create value, the share price will eventually follow. Yet that rarely happens overnight. That’s why Buffett once said: “What we really want to do is buy businesses that we will be happy to hold forever”. And in order to do this confidently, investors need to dive deep into research, or as Buffett puts it, “you have to understand the business”.
Depending on the company, the process can be a lengthy one. And it’s also why the ‘Oracle of Omaha’ strategically only looks at stocks within his circle of competence. But even then, when hunting for the best businesses in the world, Buffett admitted, “we can’t find a lot of them”.
As someone who’s been analysing stocks for over a decade, following these core principles, my research often ends with a ‘not good enough’ conclusion. And it’s why Buffett also advised that investors who lack the stamina to invest in this way should opt for passive index funds.
But “for those willing to put in the required effort”,stock picking can open the door to tremendous long-term wealth.
Practising what he preaches
Perhaps a perfect example to consider is Coca-Cola (NYSE:KO). Buffett first bought its shares in 1988, recognising the soft-drink company’s powerful global brand that granted the business an enduring competitive advantage.
Since then, he’s never sold a single share. And with earnings expanding as the firm entered and captured new markets, dividends have been hiked consistently. The result ? His initial investment’s now generating a yield close to 60% a year !
Fast forward to 2025, and Coca-Cola continues to demonstrate the world-class traits Buffett loves to see. Management has been adapting its product range to shifting consumer tastes, most notably with its Coke Zero variant. And with the group’s digital transformation offering new efficiency opportunities, Buffett continues to hold his shares, enjoying consistently and reliable dividends.
Does that make Coca-Cola a no-brainer buy in 2025? Not necessarily. Having reached a $290bn market-cap and worldwide dominant status within the beverages industry, Coke’s future growth is likely to be less impressive moving forward. And while management’s diversifying the product portfolio to tap into new opportunities, the group nonetheless faces rising pressure for both its growth and profit margins.
How big does an ISA need to be for someone to quit work and retire early?
Ben McPoland explores how long it might realistically take to reach financial freedom investing regularly in a Stocks and Shares ISA.
Posted by Ben McPoland
Image source: Getty Images
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.
Most people invest inside a Stocks and Shares ISA to help them live a more comfortable life later on. Some might even reach a point where their portfolio supports early retirement.
But how realistic is this ? And how long might it take? Let’s take a closer look.
Aiming for £1.5m
The obvious thing to note is that what one person would need in retirement is totally different to someone else. So is the affordable amount to invest every month.
For example, industry data show that most people fail to max out their £20k annual ISA allowance. When we consider that the median full-time annual salary in the UK was about £37,000 last year, this makes sense.
As such, what sum and time is needed is highly variable. But for simplicity’s sake, I’m going to assume a figure of £1.5m would be enough.
Wealth-building takes time
Now, reaching that amount might sound like a fairy tale when starting from scratch. But the following table shows how quickly this sum could be reached investing £600 every month. I’ve included three rates of annual return (8%, 10%, and 12%).
8% return*
10% return
12% return
37 years
32 years
28.5 years
*Figures do not include platform charges, and assume all dividends are reinvested.
Taking the middle 10% return scenario, this shows that it would take 32 years to reach £1.5m. So a 30-year-old could quit work and retire at 62 rather than 68 (or whatever the State Pension age is by then).
Were this investor to achieve a higher 12% average return, this would shave nearly four years off.
Some top investors have generated returns far in excess of 12%, including Warren Buffett (an incredible compounded annual return of about 20%). A person generating such a return would reach this target inside 21 years.
However, this type of return is very rare (after all, there’s a reason Buffett is a celebrated billionaire!). Indeed, 12% might even be stretching it, as the long-term global market average is more like 9%-10%.
To show what’s possible, here are two tables showing how quickly £1.5m could be reached investing £1,000 and £1,666 per month (the latter being the maximum allowance).
£1,000 per month
8% return
10% return
12% return
31 years
27 years
24 years
£1,666 per month
8% return
10% return
12% return
25 years
22 years
20 years
If you are starting out with a dividend re-investment plan, the good news is that compound interest takes a while to make a noticeable difference, better if you can add fuel to the fire with a yearly contribution.
Investors have a number of options. While they could buy UK government bonds (gilts), with 10-year gilts yielding 4.7%, they could also stray into the corporate bond market, where yields are even higher. However, bond prices can be very volatile, and investors could be hit with capital losses even if the income is stable.
Savings accounts are another option, but yields tend to lag bond market equivalents. Moreover, unless the account is inside a cash ISA, where returns are lower, savers may have to pay tax on their returns.
Basic-rate taxpayers (up to £50,270 annual income) get a £1,000 tax-free savings allowance, while higher-rate taxpayers (up to £125,140 annual income) get £500 and additional rate taxpayers (earning more than £125,140) get nothing. Any savings interest above the thresholds is taxed at income tax rates.
Money market funds could fit the bill
Money market funds are a viable in-between option, offering the income similar to gilts maturing soon, but without the complexity, while also mitigating the risk of bond price fluctuations. They can be held inside ISAs and SIPPs.
They own a diversified basket of safe bonds that are due to mature soon, normally within just a couple of months, meaning that investors can earn an income on their cash with minimal risk. They can also put money into bank deposit accounts and take advantage of other “money market” instruments offered by financial institutions.
On our platform, assets in money market funds have risen 1,100% (a 12-fold increase) in the past two years.
Fund industry trade body the Investment Association (IA) categorises money market funds into two buckets: short-term and standard-term funds.
Short-term funds are lower risk. Fund managers try to ensure the highest possible level of safety by keeping very short duration bonds and high-quality bonds in the portfolio.
Standard money market funds generally deliver slightly higher returns by owning bonds that have slightly longer maturity dates. There are also less stringent liquidity requirements.
The Royal London Short Term Money Market fund is one of interactive investor’s Investment Pathway options for investing in drawdown to access all or part of their pension. The Royal London option is for those planning to take out all their money within the next five years.
Source: FE Analytics/ latest data published as of 31 August 2025. *One-day yield figure sourced on 3 October. Past performance is not a guide to future performance.
Investors usually have a choice between an accumulation (acc) or income (inc) version of a fund, which determines whether income is automatically reinvested or paid out as cash.
Dzmitry Lipski, head of funds research at interactive investor, says: “Royal London Short Term Money Market stands out most to us in the sector. It has an excellent long-term track record, low drawdowns and is competitively priced with a yearly ongoing charge of 0.10%.
“The fund seeks to maximise income by investing in high-quality, short-dated cash instruments. The managers place particular emphasis on the security of the counterparties it lends to, while ensuring daily liquidity.”
The interest paid by money market funds will fluctuate with bond market yields, which are closely linked to central bank interest rates. This means it will rise when yields rise, but fall when yields fall. As interest rates are expected to keep dropping this year and next, yields on money markets are also likely to drop.
Bond yield: the key terms
There are three key terms that bond investors need to get their heads around: yield to maturity (also known as the running, or redemption yield), historic (or annualised) yield, and distribution yield.
Assuming all portfolio coupon payments (the level of interest promised) are made, and the principals on bonds (amount lent) are returned, the yield to maturity of a portfolio is the total annual return of a fund if all bonds are held to maturity. This assumes no portfolio changes. It’s a measure that bond fund managers use to assess what their portfolio is forecast to return, including when they get their capital back when a bond matures.
In reality, these figures change as the fund manager is constantly selling and buying bonds, but they are a helpful snapshot about return potential and income distributions.
Advantages of a money market fund
Very low risk, with the portfolio likely to at least hold its value and also pay out a modest income
Diversified, meaning investors are not exposed to a single bond failing and can withdraw their money easily
Can be held in a tax-friendly wrapper, such as an ISA or SIPP.
Disadvantages of a money market fund
Investments may fall in value, unlike savings accounts
Not suitable for growing savings over the long term as inflation will eat into returns
Sensitive to interest rate fluctuations, with lower rates leading to lower yields. Yields rise when interest rates rise
The Bank of England warns that in times of market panic and a rush to cash, there may be liquidity issues in money market funds.
This article was originally published on 30 October 2023 and updated on 3 October 2025.
Somewhere to squirrel your spare cash into, hopefully profits when you rebalance your Snowball, as you wait for the next market crash, so you have funds to buy a bargain. Sacrificing some near term interest for longer term gains.
These Utility Dividends Up to 10% Are Riding the AI High
Brett Owens, Chief Investment Strategist Updated: October 24, 2025
Wall Street still treats utilities like income relics. Big mistake.
The same wires and substations that power your home now feed NVIDIA’s data centers—and our portfolios. These “boring” utilities are morphing into AI toll collectors, handing us up to 10.4% dividends while vanilla investors chase momentum stocks.
Take Texas, for example. The grid is strained. The population is popping. New residents, factories and AI campuses are all plugging into the state’s aging grid at once. The math is no longer “mathing” and it’s about to get worse. ERCOT projects power demand will jump 62% by 2030—yikes!
And Oncor, the state’s largest utility, believes that is way too conservative. Its interconnection queue shows 186 GW of requests waiting to plug into the grid—more than double today’s peak demand (118% more!) and enough to power every home in Texas twice over!
Texas isn’t the home of the only strained grid. Let’s head to the Northwest and visit Portland General Electric (POR, 4.8% yield), which provides electricity to 1.9 million customers across more than 50 cities in Oregon. Thanks to early AI grid work, this near-5% payer is one of the few “boring” utilities with genuine growth voltage.
This West Coast Utility Delivers Even-Keeled Price and Dividend Growth
“PGE” is gearing up for the AI revolution. Recently, it announced that it’s using a new AI-enabled flexibility tool that will free up more than 80 megawatts for datacenter interconnections next year. Here’s a little detail, courtesy of digital business mag Utility Dive:
“PGE partnered with the California-based startup GridCARE, which uses AI, detailed hourly demand modeling and optimized flexible resources like batteries and onsite generators to find spare capacity. The added flexibility allows PGE ‘to interconnect multiple data center customers years earlier than initially expected,’ the companies said.”
Oregon, and Portland specifically, is currently a decent-sized datacenter market, though many other states are seeing a more rapid rate of expansion. In the meantime, PGE is ramping up investments in its own infrastructure; however, some of those costs are to mitigate the state’s growing risks for severe wildfires.
Fire risk keeps investors away, but a near-6% yield and single-digit P/E make
Edison International (EIX, 5.9% yield) a classic contrarian setup. One positive legal surprise and this scorched stock could light up. Edison serves more than 15 million customers and generates much of its electricity from renewable sources including solar, wind, and hydro. EIX also has an unconventional second business: a global energy advisory division.
EIX’s forward price-to-earnings (P/E) ratio sits at just 9; that’s less than half the sector. Its price/earnings-to-growth (PEG) ratio of 0.6 signals it’s on sale, too. (Any PEG of less than 1 is considered undervalued.)
Edison is cheap for a reason, but that reason is no secret. While PGE might have wildfire risk, EIX has known wildfire exposure—specifically, it has spent years fighting litigation over wildfire damage and has paid multiple billion-dollar-plus settlements.
Fire Has Repeatedly Burned Edison’s Bottom Line
Edison could still be on the hook for billions more related to the Eaton fires. It looked like EIX was due for some relief in September, when the California Legislature passed SB 254, creating a wildfire fund continuation account that Edison and other state utilities could tap for future wildfires—but the $18 billion figure was weaker than expected, leading S&P Global to lower its ratings on Edison’s various debt issues.
The flip side? EIX is big on renewable energy, its SoCal residential base is huge, it has an otherwise strong balance sheet, and it pays nearly 6%, dwarfing the sector average. Positive surprises about any Eaton liabilities could jolt the stock to life. So, Edison remains a much bigger high-risk, high-reward gamble than the average utility.
Canada’s Brookfield Infrastructure Partners LP (BIP, 4.9% yield) the global toll collector for the AI age—power lines, pipelines and 100+ data centers. BIP blends stable cash flow with growth tailwinds we usually pay tech multiples for.
And BIP’s assets give us two ways to leverage the AI megatrend.
For one, Brookfield boasts 8.6 million electricity and natural-gas connections, 4,500 kilometers of natural gas pipelines, and 83,700 kilometers of electricity transmission lines. But it also has a data segment that includes 312,000 operating towers and rooftop sites, 28,000 kilometers of fiber optic cable and more than 100 datacenter sites.
The problem (or advantage, depending on one’s point of view) of Brookfield is we’re getting a little bit of exposure to a lot of different things. That’s the nature of a conglomerate. But while the assets are infrastructure in nature, it’s not a very defensive stock—the flip side to that is BIP will often give us buyable dips.
However, It’s Not in One Now
Broadly, though, BIP is a well-paying stock that has raised its distribution for 16 consecutive years. I say “distribution” because it’s structured as a master limited partnership. Now, 99.9% of the time, that’s a drawback given that MLPs force us to deal with Form K-1 come tax time, but Brookfield is special—it has a mirror corporate structure, Brookfield Infrastructure Corporation (BIPC), that pays out qualified dividends instead. Alas, those shares only yield about 3.7% right now.
We can get even sweeter yields out of the utility space by investing via closed-end funds (CEFs).
Consider the MEGI NYLI CBRE Global Infrastructure Megatrends Term Fund (MEGI, 10.1% distribution rate), for instance. This mouthful of a fund is somewhat similar to BIP in that it’s not a true utility fund. But we’re still getting a heaping helping—55% of assets are allocated to utility companies such as Essential Utilities (WTRG), PPL Corp. (PPL), and PG&E Corp. (PCE). But we also get double-digit exposure to transportation, communications, and midstream/pipelines. We even get some preferred stock.
And thanks to liberal use of leverage (24% currently), we get a fat double-digit yield.
What we don’t get is much in the way of return.
Even Plain-Vanilla ETFs Have Trounced This Pseudo-Utility Play
Like with Brookfield, this global infrastructure CEF is a little too broad. I hesitate to recommend it here or in my Contrarian Income Report. However, I do keep my eye out for deep discounts on MEGI that we can take advantage of in Dividend Swing Trader. The price is currently just OK—yes, it trades at a decent 7% discount to net asset value (NAV), but that’s not even cheaper than its longer-term average discount of more than 12%.
We get much better utility exposure with the Gabelli Utility Trust (GUT, 10.4% distribution rate). This still isn’t a pure-play utility-sector fund, but now we’re at close to 70% utilities (including EIX and POR), and another 15% or so in utility-esque telecom stocks like Deutsche Telekom AG (DTEGY) and Vodafone Group (VOD).
Long-term, GUT has been much more competitive with rank-and-file sector ETFs, though its moderately levered nature (15%) and exposure to other sectors has made it more volatile over time. So, like with MEGI, our best bet is to be patient and pounce on dips.
Gabelli’s Fund Trails Long-Term, But Timing Is Key to Outperformance
But it’s almost a foregone conclusion we’ll never get truly bargain prices on GUT. Shares currently trade at a wild 83% premium to NAV, which is somehow a smidge cheaper than its long-term average premium of around 90%. The cheapest it has traded over the past year or so is at a 50% premium to NAV.
Wall Street chases AI stocks that might go higher. We’ll take the utilities that power them—and collect a sure 10.4% while we wait.
With the UK and US stock markets reaching record highs in 2025, warnings are emerging of an incoming correction, or maybe even a full-blown crash. And one of the latest calls for caution has come from Jamie Dimon, the CEO of America’s largest bank, JP Morgan Chase.
But when is this house of cards expected to come crashing down?
The next crash
Timing the market’s hard. And even an investor as successful as Dimon noted he’s unable to accurately predict what will happen next.
As such, his projected timeline for a potential market correction or crash is pretty vast, spanning anywhere from within the next six months (by April 2026) all the way out to two years (October 2027).
And that seems to match the rhetoric of a growing number of institutional asset managers who have begun advising clients to be more cautious.
For example, Trevor Greetham, portfolio manager at Royal London Asset Management, said he remains bullish on the long-term potential of US stocks. But with rising short-term uncertainty, investors should look to rebalance and avoid being too concentrated in US stocks in case the ‘bubble’ does indeed burst.
What now?
Despite the warnings coming from expert investing minds, it’s important to highlight that a stock market correction, or even crash, may not actually happen.
But let’s assume the worst and say that a downturn’s coming. What can investors do to prepare?
One of the best tactics is to do is what Greetham and Dimon have hinted at diversify. There are plenty of opportunities in defensive sectors like healthcare today that help mitigate the impact of sudden, unexpected volatility.
Take AstraZeneca (LSE:AZN) as a prime example that’s worth considering.
Even during an economic meltdown, demand for life-saving medicines doesn’t disappear, and the business has historically proven to be quite resilient. And with an impressive pipeline of late-stage drug candidates inching closer to reaching the market, the business could be primed to thrive for many years to come. That’s why I think nervous investors may want to take a closer look.
Of course, even defensive businesses aren’t without their risks.
The bottom line
The stock market will crash again. But just when is unknowable, and even Dimon’s forecast could be wrong with the current bull market continuing for many years to come.
Nevertheless, by preparing for the worst and hunting down terrific stocks to buy when prices do fall, investors can position their portfolios to deliver jaw-dropping returns over the long run.
Two different portfolios, two different ways to make money. Whilst history doesn’t always repeat but it often rhymes, TMPL whilst still high risk is lower risk compared to MNL.
