Here’s how I’d regularly invest £300 to target £2,000 of monthly passive income

Investing in shares, trusts and ETFs can be a great way to build long-term wealth. Here’s one way I could target a healthy passive income today.

Posted by

Royston Wild

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. MotleyFool

UK shares have long been a popular asset class for those seeking passive income. Thanks to products like Individual Savings Accounts (ISAs) and Self-Invested Personal Pensions (SIPPs), individuals can boost their dividend income by not having to pay a penny in tax either.

These tax-efficient products have large annual allowances. The ISA limit is £20,000, while SIPP holders can typically invest the equivalent of their yearly earnings (up to a maximum of £60,000).

However, investors don’t have to invest anywhere near this much to eventually become financially independent. Here’s how just a few hundred pounds a month could eventually generate £2,000+ in passive income

Compound miracles

A modest regular investment can turn into a large pot over time thanks to the power of compounding. By reinvesting earnings, my investment grows not just from the original amount but also from the accumulated returns. This creates substantial growth over the long term.

With this in mind, what could I make if I regularly invested £300 a month? Here’s an idea based on different rates of return and investing timescales.

	5%	7.5%	10%
10 years	£46,584.68	£53,379.10	£61,453.49
20 years	£123,310.10	£166,119.22	£227,810.65
30 years	£249,677.59	£404,233.63	£678,146.38

History shows us that all of these rates of return are possible by investing in global shares. But none of that’s guaranteed and I could lose money as well as making it.

But let’s take into account the middle figure of 7.5%. This is around the long-term average of FTSE 100 shares since the index was created in 1984.

With an investment pot of £404,233.63 after 30 years, I could shift my focus towards dividend-paying stocks to target a regular income.

Assuming I could achieve a 6% dividend yield, I’d earn £24,254 a year, which translates to just over £2,000 a month (£2,021, to be exact).

Where to invest?

Investors have thousands of shares to choose from in the UK and overseas. This makes building a diversified portfolio that provides a stable and decent over time much easier.

But instead of picking individual shares, investors can also choose from a number of investment trusts and exchange-traded funds (ETFs) to achieve the same goal.

These financial vehicles spread their pooled capital across a variety of assets — and in some cases across asset classes — to reduce risk and capitalise on different growth opportunities.

With this in mind, I might want to invest in a FTSE 100 tracker fund to target that 7.5% average annual return. The one I’d probably choose is the iShares Core FTSE 100 UCITS

There are many funds like this on the market today. But with a total expense ratio of just 0.07%, this is the most cost-effective one right now.

FTSE 100 trackers like this provide exposure to blue-chip companies with market-leading positions, diverse revenue sources and robust balance sheets. And with a wide selection of constituents including banking giant Lloyds, drugmaker AstraZeneca and miner Rio Tinto, I can enjoy exceptional diversification.

Past performance is no guarantee of future returns. And a lack of appetite for UK shares could impact how much I make from the fund in the coming decades.

But with investor appetite for British stocks recovering, I think this ETF could be an excellent way to target long-term wealth, alongside my portfolio of individually selected shares.

££££££££££££

If u buy a tracker, as long as u can choose when to sell u will not lose any of your hard earned. The tracker may fall for several years with the market but could be a home for dividends if u can’t re-invest at a 7% yield. Not as safe as receiving dividends but an option if u are in your accumulation stage.

I bought these 3 REITs for BIG passive income

After REITs have been getting crushed, Zaven Boyrazian’s been busy snapping up bargains to supercharge his portfolio’s passive income.

Posted by

Zaven Boyrazian, MSc

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.

Real Estate Investment Trusts (REITs) have been pulverised since the Bank of England (BoE) started raising interest rates. With property valuations plummeting and debt burdens increasing, investors have been seemingly fleeing this segment of the market, sending these stocks into the gutter.

However, there are plenty of REITs caught in the panic-selling crossfire whose rental cash flows remained resilient, maintaining and even boosting dividends. So much so that I couldn’t help but capitalise on the situation and snap up some terrific bargains and tasty dividend yields.

Jump ahead to today, and these businesses continue to chug along nicely despite what their continued depressed valuations would suggest. And now that the BoE has started cutting interest rates, REITs could be primed to surge in the coming years.

So which stocks did I buy? And should I buy even more today?

Becoming a passive landlord

REITs are a marvellous vehicle for investing in real estate. While a direct investment can provide more control, using this indirect method provides a far more passive approach to generating extra income.

They also open the door to owning some more lucrative commercial real estate rather than being stuck in the more fickle residential sector. And it’s an advantage I fully capitalised on when I bought shares in Londonmetric Property (LSE:LMP), Safestore Holdings (LSE:SAFE), and Warehouse REIT (LSE:WHR).

Across these three stocks, there’s not much variation in the business model. Each owns a portfolio of real estate assets that are leased to businesses or individuals, and the rent is used to service debt and pay dividends. But the companies specialise in different areas of the market.

Londonmetric is predominantly focused on large-scale distribution centres used by retailers and e-commerce giants like Amazon and Tesco. Warehouse REIT caters more to last-mile delivery urban warehouses. And Safestore specialises in self-storage facilities across the UK and Europe.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Debt vs dividends

Buying and developing new properties isn’t cheap, especially in the commercial sector, where the costs venture into the millions. And since their REIT status requires that 90% of net profits must be paid out as dividends, these firms, along with almost every other REIT, are reliant on external financing.

In other words, they’ve each got their own chunky pile of debt to contend with. And that’s created some fairly understandable concern in recent years. Each has seen their interest expenses rise considerably, ramping up the pressure. And Warehouse REIT, in particular, has even had to sell off some properties to shore up its balance sheet.

Yet, despite the wobbles, dividends have remained intact across the board. In fact, both Londonmetric and Safestore have continued to hike shareholder payouts. And when paired with a falling share price, it’s translated into a far more impressive rising dividend yield. That’s why I’m still tempted to add more shares to my portfolio today while they continue to trade at a discount.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

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rajabandot 

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Make your own plan and stick to it thru thick and thin but tweak it as u progress along your investment journey.

Dividends received £8,344.19

Cash to invest £765, with the dividends to be received next week the next re-investment is likely to buy more of FSFL

The income fcast for next year remains at £9,120.00 and the target 10k.

The equivalent of a ‘pension’ of 9% and u retain all your capital.

Fund Insight (winterflood.com)

If u want a high income it has to be AEI, or u could pair trade a different Trust with a higher yielder to achieve a blended yield of 7%.

The choice, my friend is yours.

Most-owned dividend stocks by UK income funds

08 October 2024

Trustnet reveals the stocks that appear most often in the top 10 holdings of UK in portfolios.

By Jonathan Jones

Editor, Trustnet

Investors need to be careful when holding more than one IA UK Equity Income fund or they risk owning many of the same stocks, according to data from FE Analytics.

A contracting UK market – with a record number of FTSE 350 companies currently under offer and many larger companies getting taken out in a frenetic wave of M&A activity – may be forcing fund managers into the same shrinking pool of companies.

Additionally, although the dividend picture in the UK is improving, it was hit last quarter as mining stocks slashed their payouts, limiting the number of options further for those with an income mandate.

As such, Trustnet investigated the most common stocks among funds in the IA UK Equity Income universe, where there is an alarming level of crossover.

The table below shows the percentage of the 74 funds in the sector that own the 10 most popular stocks in their top 10 holdings. The figures below – big as they may be – are likely to be even higher if full portfolio data were available.

Source: FE Analytics

In the top spot, some seven in 10 funds in the IA UK Equity Income sector own pharmaceutical giant GSK among their top 10 positions. We have included an asterisk here as we have scanned for fund factsheets that refer to GSK and/or GlaxoSmithKline.

Among the funds with a large weighting to the stock, Man GLG Income tops the list with a 6.5% position. Managed by FE fundinfo Alpha Manager Henry Dixon, GSK is the biggest holding in the £1.9bn fund, which also includes six other names on the top 10 list above: BP; Rio Tinto; HSBC; Barclays; Lloyds; and Shell.

Other funds with notable weightings of more than 5% to GSK include Jupiter UK Income (6.2%), CT UK Equity Alpha Income (5.9%), BNY Mellon UK Income (5.8%) and CT UK Equity Income (5.6%).

However, these figures were lower than others on the list, suggesting that, although most managers own the stock, they tend not to be as concentrated.

Managers appear to have more conviction in the second most popular stock among UK equity income funds: Shell. More than half of the sector own the oil behemoth in their top 10 holdings – 56.8% to be precise.

WS Canlife UK Equity Income and BNY Mellon UK Income have the largest positions here, with more than 9% allocated to the stock in both funds – around 3 percentage points higher than the top backers of GSK.

Schroder UK-Listed Equity Income Maximiser (8.5%), HSBC Income (8.3%) and JPM UK Equity Income (8.3%) also have significant weightings.

However, it is worth noting that Shell is a larger part of the FTSE All Share index, and therefore to go overweight the stock managers will need to take a chunkier position size.

In all except Schroder UK-Listed Equity Income Maximiser, Shell is the largest position in the fund. Instead, the Schroders fund lists AstraZeneca as its biggest holding, worth 9.5% of the portfolio.

AstraZeneca is third on the list of most-owned UK companies among IA UK Equity Income funds, with just under half (48.6%) of the sector including it in their top 10.

UBS UK Equity Income, CT Select UK Equity Income, WS Canlife UK Equity Income and CT Responsible UK Income are the others with the pharmaceutical giant featuring among their top five holdings, with position sizes ranging from 9.2% to 7.8%.

Following the same pattern, BP is in joint fourth place, with 45.9% of the sector owning the stock in their top 10 holdings. It means the top four are split between oil titans in second and fourth place, spliced with pharma companies in first and third.

Although a popular choice, funds that own BP in their top 10 are less concentrated in the stock, much in the same way as GSK. The portfolio with the biggest allocation to BP (UBS UK Equity Income) only has 6.3% in the company.

M&G Dividend and M&G Charifund have 5.7% and 5.5% respectively in BP, while JOHCM UK Equity Income and L&G UK Equity Income have put around 5.2% in the stock.

Rounding out the top five is consumer staple Unilever, which appears in an identical number of top 10 lists as BP.

Familiar names have significant exposure to Unilever, including Fidelity Moneybuilder Dividend (7.7%), CT UK Equity Alpha Income (6.9%) and CT UK Equity Income (6.2%), the latter of which have made an appearance in this article already.

Lazard Multicap UK Income and Schroder UK-Listed Equity Income Maximiser round out the top five backers of Unilever.

Lower down the table above, banking groups HSBC, Barclays and Lloyds are all well backed by IA UK Equity Income funds. The former is the most popular, with 40.5% of the sector taking a top-10 position in the group, while the figures drop to 28.3% and 24.3% for Barclays and Lloyds respectively.

Rio Tinto splits up the bank run, sitting in the seventh spot, with 31.1% of funds in the sector backing the world’s second-largest mining company, while cigarette and vape company British American Tobacco rounds out the top 10, just pipping its rival Imperial Brands.

Questor: Private equity is snapping up cheap property funds – this one is no exception

Story by Russ Mould

City of London

Commercial property is still an area of which many investors remain wary, given the relentless onslaught posed by online rivals to brick-and-mortar retailers and the impact of hybrid working upon demand for office space.

But the result is that some real estate investment trusts, Reits, trade at big discounts to net asset value.

British Land (which Questor tipped in 2018) is one example. Its last reported NAV was 562p per share, and while the danger is the discount closes because the share price goes down, rather than asset values go up, the property giant may yet pay its way in the portfolio.

Questor: Private equity is snapping up cheap property funds – this one is no exception

Lowly Reit valuations are attracting attention. Private equity giant Starwood is bidding for Balanced Commercial Property Trust while Segro is in the process of buying Tritax EuroBox and New River Reit is bidding for Capital & Regional.

Questor says: Hold

Ticker: BLND

Share price at close: 423p