My £5-a-day starter plan to build a regular second income by 2030 and beyond

Story by Mark Hartley

My £5-a-day starter plan to build a regular second income by 2030 and beyond.

What’s a second income worth ? How much effort’s considered a fair amount to dedicate to building towards one ? Many people take on two jobs to earn an extra income, waking early and working late into the night.

Set and forget

A core tenet of this strategy is ‘set-and-forget’. Once it’s set up, it can be left to do its thing without further action. All it requires is saving £5 a day and investing it into the portfolio. With certain accounts, this can be automated to occur monthly.

This is considered a good strategy for beginner investors because it avoids the risk of panic-selling. Investors lacking market experience are more likely to make mistakes by trying to actively manage a portfolio. Often, a portfolio has a better chance of growing if left to its own devices.

That is, assuming the right stocks are chosen. Volatile growth stocks in emerging industries are not the way to go here, as their futures are uncertain. A better option could be an investment trust or index fund with a long history of solid performance.

The ETF’s enjoyed annualised growth of 8.7% over the past 10 years. Since it’s highly diversified across almost all markets in the world, it’s resilient against a downturn in any individual region or industry. Even though past performance isn’t indicative of future results, I believe its growth trajectory’s fairly reliable.

An investment of £5 a day could grow to around £13,600 in five years. Even with a decent dividend yield, that would only return around £100 a month of income. That’s why it’s best to start as soon as possible and think long-term. Investing in the stock for 20 years could grow the pot to £100,000. Shifting that much capital into a portfolio of high-yield dividend stocks could pay out around £670 a month.

While that may not sound like much, it requires a small investment, little effort and minimal risk. A fiver a day seems like a small price to consider. 

The post My £5-a-day starter plan to build a regular second income by 2030 and beyond appeared first on The Motley Fool UK.

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