£8,800 in savings? Here’s how investors could turn that into a £20,000 second income… with time
Millions invest for a second income. Here, Dr James Fox explains how an investor can generate a life-changing figure from a modest starting point.
Posted by
Dr. James Fox
Published 19 June
Image source: Getty Images
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Turning an initial £8,800 in savings into a £20,000 annual second income is an ambitious but achievable goal. Like anything in life, it requires commitment, learning, and a level-headed approach.
So, let’s find out how it can be done.
There’s a formula for success
There are several parts to the formula, and central to it is harnessing the power of compounding effectively over time. Compounding occurs when investment returns generate their own returns, creating a snowball effect that accelerates portfolio growth. This process is fundamental for building wealth, especially when combined with regular contributions and a disciplined investment approach.
Consider an investor who starts with £8,800 and adds £250 monthly into a diversified portfolio targeting an average annual return of 7%. After 31 years, this portfolio would be worth in excess of £400,000.
At that point, withdrawing 5% annually would provide a second income of around £20,000. Increasing monthly contributions or achieving slightly higher returns could significantly impact the size of the portfolio over the long run.
Regular contributions are crucial because they boost the investment base, allowing compounding to work on a larger amount. Even modest monthly additions accumulate significantly over decades.
It’s also worth noting what can be achieved if an investor maxes out their ISA (£20,000 per year of contributions) and achieves a higher but achievable 10% annualised growth rate. Using 31 years as a comparison point, the below chart shows £8,800 transform into £4.6m.
Source: thecalculatorsite.com
Of course, this is just an example. Many novice investors lose money chasing get-rich-quick dreams. And I appreciate that I could fall short of 10% annualised returns.
1 pence dividend declared, with an additional special dividend of 3 pence expected when proceeds from the sale of the Big Rock investment tax credits (“ITCs”) are available for distribution.
Residential Secure Income plc
Dividend Declaration
Residential Secure Income plc (“ReSI)”, or the “Company“) (LSE: RESI), which has invested in independent retirement living and shared ownership to deliver secure, inflation-linked returns and is now implementing a managed wind-down strategy, is pleased to declare an interim dividend of 1.03 pence per Ordinary Share to be paid in the financial year to 30 September 2025.
UIL LIMITED
Third quarter dividend declaration
The Board of UIL Limited has declared a third quarterly interim dividend of 2.00p per ordinary share in respect of the year ending 30 June 2025, which will be paid on 29 August 2025 to shareholders on the register on 8 August 2025. The ordinary shares will go ex-dividend on 7 August 2025.
US Solar Fund plc (LON:USF (USD)/USFP (GBP)), the renewable energy fund investing in utility-scale solar power plants across North America, is pleased to release its first quarter update for the period ended 31 March 2025.
Highlights for the quarter to 31 March 2025:
NAV update:
· USF’s unaudited NAV as of 31 March 2025 is $196.6 million ($0.64 per share) which represents an increase of approximately 1.3% from the audited NAV as of 31 December 2024
· The movement in NAV reflects the roll-forward of the valuation models and adjustments to portfolio working capital over the period
Dividend update:
· Dividend of 0.56 cents per Ordinary Share for Q1 2025 to be paid by 4 July 2025, in line with the Company’s existing annual dividend target of 2.25 cents per share
· On 17 April 2025, the Board announced an increase in the annual dividend target from 2.25 cents per share to 3.5 cents per share, which will take effect in Q3 2025
Portfolio performance:
· Generation by the Company’s portfolio in the first quarter was 9.1% below forecast (-11.6% for Q1 2024), with +2.2% attributable to favourable weather and -11.3% attributable to technical (non-weather) factors
· Performance during the first quarter was impacted by unplanned outages, particularly at the Heelstone and Granite portfolios. This was related to technical issues, as well as planned outages timed to allow maintenance activities to be completed during the lowest production quarter of the year and ensure equipment longevity
· Ongoing initiatives to manage and remediate technical issues to reduce the occurrence and length of unplanned outages continue to be implemented as part of the remediation plan developed by the Investment Manager’s asset management team
Current yield 5.8%, neither belt or braces so not in the watch list.
Solar stocks plunge: Solar stocks sank premarket due to a proposed phaseout of solar and wind tax incentives by 2028. Sunrun (RUN) dropped 35%, SolarEdge (SEDG) 29%, Enphase (ENPH) 20%, and First Solar (FSLR) 17%. Source: CNBC.
Wall Street Is Cutting Off Uncle Sam (Priming This 9% Payer for Gains)
Brett Owens, Chief Investment Strategist Updated: June 10, 2025
BlackRock, the world’s largest asset manager, is turning its back on long-term Treasuries—and that’s rattling the bond market.
That, in turn, has the mainstream crowd turning its back on ALL bonds.
Mainstream crowd turning its back? That’s all we need to hear! In a second, I’ll reveal a 9% “contrarians only” dividend that’s tailor-made for this critical time in Bond-land.
First, let’s break down what the global investment titan is telling us here: In its weekly commentary, released June 2, BlackRock laid things out in stark terms (or at least as stark as a stuffy financial institution gets!):
“Our strongest conviction [bolding mine] has been staying underweight long-term US Treasuries.”
Then the real kick in the teeth: “We prefer the euro area to the US.” Ouch.
BlackRock’s not alone in turning up its nose at long-term government bonds. DoubleLine Capital, led by “Bond God” Jeffrey Gundlach, is turning away, too—especially when it comes to the longest of the long bonds:
“Where we can outright short [30-year Treasuries], we are,” one of the firm’s portfolio managers recently said.
We’re talking about 30-year Treasuries here. Invest for three decades and get your cash back at maturity, with a steady payout kicked your way every year.
Till now, these have been seen as among the safest of the safe investments. Yet as I write this, investors are demanding a near-5% yield to take on the “risk” of owning them!
Bond Panic Is Our Opportunity—in These 9%-Paying Funds
All of this—not to mention weak demand at a recent 20-year government bond auction—has investors fretting over bonds, corporate and government alike.
We, meantime, are targeting select corporate bond closed-end funds (CEFs) like the one we’ll name below, quietly kicking out yields of 9%, 10% and more. Let’s get into why, starting with Uncle Sam.
It’s not hard to see why investors aren’t keen to boost his credit line. The Congressional Budget Office (CBO)—famous for its rose-colored glasses—has already projected a $1.9-trillion deficit for 2025.
This leaves the government with a $40-trillion debt hole, deepening by $2 trillion a year. Congress is also working through the One Big Beautiful Bill Act, which the CBO estimates will add $2.4 trillion to deficits over the next decade. And, of course, Moody’s recently lowered America’s credit rating.
With buyers of government debt thin on the ground, long-term government bond yields are rising (and prices are falling, as yields and prices move in opposite directions). That’s a giant red flag for all bonds, right?
Bessent’s Making Quiet Moves to Curb Rates Now …
While this interpretation isn’t exactly wrong, it focuses too much on the numbers and not enough on the human factor, specifically Treasury Secretary Scott Bessent and Fed Chair Jay Powell—or more specifically, Powell’s likely successor.
Let’s start with Bessent, who has straight-out said he wants to lower the 10-year Treasury rate—pacesetter for consumer and business loans. He’s got plenty of tools at his disposal, including leaning more heavily on short-term debt to fund the government.
That limits the supply of “long” bonds, offsetting future lame auction demand and driving up bond prices (while reducing their yields). This is something Bessent criticized former Treasury Secretary Yellen for doing. But he’s been quietly keeping it up.
Finally, we’ve got an administration fixated on tariffs (which slow growth) and lowering energy prices. It won’t take much extra drilling to pull off the latter—WTI crude is already on the mat, at $63 a barrel as of this writing, on rising OPEC production.
Then there’s Jay Powell, who, yes, has been holding off on rate cuts. (Jay controls the “short” end of the yield curve, the rate banks charge each other for short-term loans.)
But Jay’s term ends in 11 months, and it’s highly likely the administration will appoint a successor who would work with the government to reduce rates. Lower “short” rates would act as a weight on long rates, helping push bond prices higher.
The Bond God’s Favorite 9% Dividend Is Built for Times Like These
All of this is a prime setup for high-yield corporate debt, which is being shunned along with the federal government’s credit. A top play comes from the Bond God himself: the DoubleLine Yield Opportunities Fund (DLY).
As I write this, DLY yields 9%, and its real strength is its wide mandate—Gundlach is free to invest in any form of high-yield credit, anywhere in the world.
That’s what we want: This bond savant unchained and working for us!
He’s taking a smart approach, too, keeping most of DLY’s portfolio (just under 70%) in high-yield corporate bonds, mortgage-backed securities (which despite the fact that they touched off the 2008 financial crisis are highly regulated today), emerging-market debt and a range of other debt instruments with durations of three years or less.
That’s a prudent setup, as shorter-term bonds still kick out strong yields and won’t be hit as hard as longer-term bonds if rates stay stuck at these levels for a while, or even rise. It also frees up Gundlach to reinvest faster as the rate picture shifts.
Beyond that, since Gundlach can invest across the globe, DLY can benefit as more capital, spooked by Uncle Sam’s bloated budget, hunts for yield abroad.
As I write, DLY trades at a 0.6% discount to net asset value (NAV, or the value of its portfolio) down from a roughly 1.5% premium earlier this spring. The fund also pays that 9% annual dividend with monthly distributions. It has paid special dividends in the past, too.
The bottom line? With Bessent working to bring down rates now, and more help likely from the Fed down the road, we’ve got a flexible setup for income and upside, guided by Gundlach himself. Let’s buy before this discount grows into a healthy premium.
A favoured share for the Snowball, although if you wanted to achieve a 7% blended yield, you would have to pair trade it with a higher yielder. Another opportunity that the Snowball failed to buy, although it did make a profit of £732 trading another dividend hero MRCH.
The Snowball is building a rainy day fund, so maybe one day it can buy LWDB but looking at the chart, not for a while, which is a plus as it will allow time for more funds to be added to the rainy day fund. There will be around 2k of income to be re-invested into the Snowball this month, most probably in RECI.
But using only the information provided by the chart, again with the benefit of good ole hindsight, which share would you had the greatest chance of making a capital gain along with your dividend income if you research was wrong ?
The Monty Hall Market: Three lessons for today’s investors
09 June 2025
Orbis takes a cautionary look at market concentration, investor herd behaviour and the importance of stepping beyond the obvious in search of lasting value.
By Orbis Investments
In today’s investment landscape, the dominance of the US – especially a handful of mega-cap technology companies – is hard to ignore. These firms have powered a disproportionate share of global equity market returns in recent years and the US now accounts for around 75% of the MSCI World index. The so-called ‘Magnificent Seven’ have captured investor imagination and capital alike. But when nearly everyone is crowded around the same trade, it’s worth asking: what if we’re all looking behind the wrong door?
Enter the Monty Hall problem. This classic probability puzzle, loosely based on a 1970s game show, involves a contestant picking one of three doors. Behind one is a car, behind the others, goats. After the contestant picks, the host (who knows what’s behind each door) opens one of the remaining doors to reveal a goat. The contestant is then given the option to switch. While most stick with their initial choice, switching actually doubles the contestant’s odds of winning the car!
The puzzle is a compelling metaphor for today’s markets: just because something feels obvious – or has worked recently – that doesn’t make it the right choice in future.
Lesson 1: The obvious choice isn’t always the best one
On the surface, staying heavily invested in US equities looks sensible. It’s the world’s largest economy, home to dominant companies, and it has outperformed for over a decade.
But history reminds us that market leadership shifts. In the late 1980s, Japan made up more than 40% of the global index before its bubble burst. Similarly, the dot-com crash of 2000 exposed the perils of speculative excess in the technology, media and telecoms sectors. Both events were obvious in hindsight, but herd mentality and a fear of missing out clouded judgements at the time.
Source: FTSE, Orbis. Image Source: Grantuking via Wikimedia Commons. Benchmark data is for the FTSE World Index. Statistics are compiled from an internal research database and are subject to subsequent revision due to changes in methodology or data cleaning. Data shown through to January 2002 to show subsequent peak to trough decline.
Today’s US equity market shows signs of similar concentration and froth. President Trump’s renewed tariff threats have unsettled markets as well as global supply chains, and fresh US export restrictions on chips to China prompted warnings from Nvidia about billions in lost revenue. Meanwhile, valuations remain stretched.
For a generation of investors raised on uninterrupted American outperformance, it may be time to reassess where the real risks – and opportunities – now lie.
Source: LSEG Datastream, Orbis. Relative total return of the DataStream US Market versus DataStream World ex-US Market indices.
Lesson 2: Insight matters – but only if you act on it
Spotting market dislocations is one thing, acting on them is another. Investors may sense that sentiment is frothy but going against the crowd is always difficult. It’s particularly hard when the prevailing narrative is that “AI is the tide that will lift all boats” and investors are surrounded by highly speculative activity being wildly profitable.
At the end of 2024, cryptocurrencies and digital tokens were valued at $3.3 trillion – up 96% in a year. In a sign of the times, ‘Fartcoin’ which was launched in October ended 2024 with a market cap just shy of $1 billion. That’s more than three times the peak valuation of Pets.com, the dot-com bubble’s poster child, which managed to go public and go bankrupt in the same year back in 2000.
Source: CoinGecko, Cryptocurrency logos. *Total market capitalisation of all cryptocurrency.
Meanwhile, US hyperscalers have been ramping up capital expenditures to chase AI dreams – with no clear line of sight to monetisation. Their ratios of capex to sales are rising sharply, and it’s not clear that returns will justify the outlays.
And that’s the crux of it: markets aren’t always efficient, especially when investors are chasing hype over substance. As the Monty Hall problem teaches us, knowing the odds isn’t enough. You need to tune out the noise and have the conviction to switch, even when it feels uncomfortable.
Lesson 3: Nothing is certain – apart from death and taxes
Even with the optimal Monty Hall strategy, contestants only win two-thirds of the time. In investing, research shows that even top-tier managers only get it right about 60% of the time. That’s why broad and thoughtful diversification across sectors, geographies, and styles is so valuable.
Many investors today believe they’re diversified because they hold global index trackers. But with US stocks now making up nearly 75% of global benchmarks like the MSCI World index, many portfolios are far more concentrated than they appear. That concentration is made more problematic by valuation levels. The S&P 500 trades at around 23 times forward earnings – well above its historical average and significantly more expensive than global markets, which average closer to 14 times. This discrepancy suggests that investors might be paying too much for the comfort of familiarity.
Source: LSEG Datastream, Orbis. World ex-US is the Datastream World ex-US Market Index. US is the Datastream US Market Index. Calculated using I/B/E/S consensus 12-month forward earnings estimates.
Meaningful diversification is about holding assets that behave differently and the benefits are felt most when the prevailing market trends reverse. Investors need to ask whether their portfolios are truly positioned to weather regime changes. And if they aren’t, what’s stopping them from switching?
Reframing comfort zones
The Monty Hall problem teaches us that the obvious answer isn’t always the correct one. The same holds true in investing. Sticking with the US and big tech may have felt safe, until very recently at least, but sticking with what’s familiar can offer false comfort. In today’s environment, defined as it is by extreme market concentration and investor herding, the real edge lies in having the conviction to take a different path.
Ultimately, investors must always be sceptical about simply following the prevailing market consensus, as current prices already reflect those views. Proper diversification today also requires going beyond simply mirroring global benchmarks.
Just as switching doors improves your chances in the Monty Hall problem, being willing to look beyond the obvious and focus on where value is being overlooked is the key to long-term success in investing.
