Almost nothing saved? Here’s how you can still build a second income portfolio by investing

Millions of Britons have almost nothing saved, but that doesn’t mean they can’t start working towards a life-changing second income from today.

Posted by

Dr. James Fox

Published 29 September

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.

Many people assume that without a large pot of cash already saved, the dream of generating a second income from investing is out of reach. But the reality is that even starting from almost nothing, a disciplined approach can still build a meaningful income stream over time.

The key lies in consistency. Let’s imagine a new investor can put aside just £250 a month into a Stocks and Shares ISA. That’s £3,000 a year. If those funds are invested in a diversified portfolio that generates an average annual return of 7%, the portfolio could grow to around £125,000 after 20 years.

At that point, drawing a 5% income from the portfolio would provide more than £6,000 a year. While it may not replace a salary, it represents a valuable supplementary income stream, particularly in retirement.

Of course, the more we contribute and the more successful we are at investing, the larger the end figure. Indeed, £500 a month in contributions could build a pot in excess of £250,000 in the same timeframe, potentially generating over £12,000 annually at a 5% withdrawal rate.

The strategy isn’t about chasing quick wins, but about harnessing compounding. There are risks, of course. Stock markets are volatile, and returns are never guaranteed. But history shows that patient, regular investing has rewarded those who stick with it.

Even if starting with almost nothing, consistency and discipline can transform modest monthly contributions into a powerful second income portfolio over the long term