What is passive income, anyway? And why do I love it so much?

A Russian proverb states, “Those who take no risks, drinks no Champagne”. So that’s why I use these simple investments to generate powerful passive income!

Posted by Cliff D’Arcy

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

When I first started investing in the late 1980s, I was studying maths, statistics, and computer science. This gave me a leg-up in understanding financial markets, so I’ve been trying to build wealth ever since. However, I often hear students and young people say they ‘hate maths’ and don’t understand investing. So here’s my quick guide to one of my favourite things: passive income.

What is passive income?

Passive income is earnings that come other than from paid work. Nevertheless, some passive income requires hard work, such as managing rented properties — dealing with tenants and their problems. I’m too lazy for this, so I haven’t built a property empire.

Unearned income can come with little effort, such as savings interest from cash deposits. That said, I don’t know many people who got rich from avoiding all risks, so I don’t keep tons of cash in savings accounts.

Owning bonds is riskier than saving in cash, because these fixed-income securities are IOUs (debts) issued by companies and governments. If trouble arrives, their coupons (interest) and capital (the initial investment) could be under threat. Even so, my wife and I own a wide range of bonds through a single money-market fund.

My favourite unearned income

However, my preferred form of passive income by far is share dividends. Some people believe that owning shares is no better than buying lottery tickets. However, my goal is to become part-owner of a wide range of great businesses. And when these companies do well, many of them choose to pay out dividends to shareholders.

Most members of the UK’s FTSE 100 index pay dividends. This makes the Footsie my happy hunting ground for generating passive income. Still, future payouts are not guaranteed, so they can be cut or cancelled at short notice (as happened in Covid-hit 2020/21). But as American tycoon John D Rockefeller once remarked, it gives me great pleasure to see my dividends coming in.

The Motley Fool

Story by Royston Wild 2024

Dividend shares are (in my opinion) one of the best ways to target a long-term passive income. With the use of a Stocks and Shares ISA, investors can build a large and steady income stream with shares, trusts and exchange-traded funds (ETFs).

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Choosing funds

It’s critical to remember that dividends are never guaranteed, as company payouts during the pandemic showed. As the Covid-19 crisis exploded, even the most reliable of passive income stocks cut, postponed or cancelled dividends entirely as earnings faltered and balance sheets deteriorated.

Yet over the long term, we’ve seen that a well-diversified portfolio can deliver a reliable stream of dividends. A portfolio whose holdings are spread across dozens of companies, industries and regions can provide a solid income across all points of the economic cycle.

Here are two top ETFs worth considering that I believe could deliver a large long-term dividend income.

1. Broad appeal

With holdings in scores of companies worldwide, the SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE:GBDV) offers excellent diversification straight off the bat.

In total, this ETF has holdings in just over 100 different shares. Major holdings range from Verizon Communications and CVS Health to Universal Corp.

On the downside, half the fund (49.5%) is tied up in US shares. This means it carries greater geographical risk than more regionally spread vehicles. However, this allocation also taps into the long-term outperformance that Wall Street has enjoyed.

This SPDR ETF’s quest for dividend growth doesn’t mean that yields are sacrificed however. Its 12-month trailing dividend yield’s currently a market-beating 3.9%. During the last five years, the fund’s delivered a total average annual return of 10.5%.

2. A targeted approach

Investing in property stocks is another way to target a dependable passive income. There are many themed ETFs available to play this hand, one of which is the iShares MSCI Target UK Real Estate (LSE:UKRE).

Thanks to their consistent rental incomes, property stocks tend to enjoy consistent cash flows that support regular dividend payments. I like this particular fund because it focuses more specifically on real estate investment trusts (REITs). These investment vehicles are required to pay at least 90% of annual earnings from their rental operations out in dividends.

What’s more, the REITs it holds span multiple sectors including healthcare, retail and residential, providing an attractive balance of reward and safety. A large portion of the fund’s also dedicated to UK government bonds as well, which provides added security.

Since 2020, this iShares fund has delivered an average annual return of just 0.6%. It could continue disappointing if interest rates remain higher than normal. But with inflation dropping, I expect returns to improve strongly from this point.

The 12-month trailing dividend yield here’s a huge 6.6%.

It’s critical to remember that dividends are never guaranteed, as company payouts during the pandemic showed.

The Snowball invests mainly in Investment Trusts as most have reserves to pay their dividends in time of market stress.

Why the Snowball doesn’t own any shares.

Anglo American PLC on Thursday slashed its interim dividend as rough diamond business De Beers continued to underperform, at the time when the diversified miner is simplifying its business with De Beers one of the operations set to be spun off. Anglo American cut its interim dividend to 7 US cents from 42 US cents, owing to negative earnings from discontinued operations and lack of contribution from De Beers.

Technically SUPR is no longer an Investment Trust but

TRADES ON THE INTERNATIONAL SECURITIES MARKET

Still a strong hold for the Snowball.

Welcome to any new readers. Below are the rules for the Snowball, there are only 3.

One. Buy Investment Trusts and or ETF’s that pay a ‘secure’ dividend and use those dividends to buy more Investment Trusts and or ETF’s that pay a ‘secure’ dividend.

Two. Any share that drastically changes its dividend policy must be sold even at a loss.

Three. Remember the rules

The ultimate compound interest example. If held within or outside a tax wrapper all capital gains are tax free. The British Government’s desperate need to borrow your money means it not going to change anytime soon.

If you hold until the 31/01/2028, the government will deem your gilt at £100.00. You don’t need to do anything they will send you your money.

Despite all you may read, it’s a government backed scheme for rich people to avoid paying tax. If you are saving for a special reason, you can work out your payment to the nearest penny. Or if you are nervous about buying high yielding shares as a comfort blanket, if you pair trade.

GL

5 years is a long time to wait to find out how wrong you were.

https://www.mjsmedicals.com mjsmedicals.comx Foran67260@gmail.com 206.232.1.223

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Man writing ‘now’ having crossed out ‘later’, ‘tomorrow’ and ‘next week’© Provided by The Motley Fool

Story by Ben McPoland
 

One of Warren Buffett’s well-known pieces of advice is: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”

In other words, we will need to regularly invest and be patient. The good news is that this is possible and can lead to a sizeable passive income stream down the road.

Harness the power of compound interest

When it comes to building wealth, compounding is an investor’s best friend. Indeed, Buffett himself admitted that: “My life has been a product of compound interest.”

Specifically, the ‘Oracle of Omaha’ has consistently reinvested the profits from his investments back into the market. This strategy has allowed his capital to keep growing. The longer he holds onto his winning investments, the more they compound, significantly increasing in value.

Indeed, the effect has been so powerful that around 90% of his $135bn fortune was accumulated after the age of 60 (he’s now 93).

While nothing to grumble about, it’s not really a mouthwatering sum. However, if I reinvest my dividends back into buying more shares at the same average price, that £3,500 becomes £38,061 after 30 years

High-quality stock

I’ve chosen this reinvestment strategy with my shares in BBGI Global Infrastructure (LSE: BBGI).

This is a FTSE 250 infrastructure investment company that manages a portfolio of 56 assets across the UK, Europe, North America, and Australia. These include schools, hospitals, toll bridges, motorways, and army barracks.

BBGI earns income from public authorities based on the availability and performance of these assets rather than their usage. This provides the company with predictable cash flows, which in turn has supported consistent and rising dividends.

Now, I should mention that the yield is at a historic high due to the high interest rate environment. This has negatively impacted the value of the firm’s assets and also made building out its portfolio much more challenging. There’s a risk these conditions could persist for some time or even worsen.

Reassuringly though, BBGI says its current portfolio of assets could support rising dividends for another 15 years. That’s music to my ears.

A mighty portfolio

Let’s assume I start from scratch and invest £750 every month into quality stocks like BBGI. Assuming I generate a long-term average return of 8.5% (with dividends reinvested), this is what would happen.

My portfolio would grow to an incredible £1.16m in 30 years (excluding any platform fees)!

If my shares were by this point yielding an average of 7% in dividends, I could be earning £81,303 a year in passive income.

In my view, turning £750 a month into this would be equivalent to building a passive income empire.

The post No savings at 35? I’d follow Warren Buffett and aim to build a passive income empire appeared first on The Motley Fool UK.

19 June 2025

BBGI Global Infrastructure S.A. (“BBGI”)

Announcement of Cancellation of Listing

Further to the announcement made by BBGI on 17 June 2025, BBGI confirms that the listing of the BBGI Shares on the Official List and the admission to trading of the BBGI Shares on the Main Market of the London Stock Exchange were each cancelled with effect from 8.00 a.m. (London time) on 19 June 2025.

miracle-compound-growth© Getty

It’s possible for ordinary investors to turn a £10,000 lump sum into as much as £150,000. The only catch is that it may take a little patience.

Its ability to grow wealth exponentially over time is nothing short of miraculous. Yet a new survey by Hargreaves Lansdown shows almost three quarters of us underestimate its power.

Joseph Hill, senior investment analyst at Hargreaves Lansdown, said millions fall behind in their retirement plans as a result. “Compound interest has something in common with other wonders of the world. To most people it’s mysterious and beyond comprehension.”

It’s worth taking a little time to understand how this little wonder works. Compound interest can transform relatively small sums into something sizeable. There’s a catch though. It needs time.

Compound interest is the process where the interest you earn on your initial investment also earns interest. Which earns interest too.

This creates a snowball effect, where your money grows at an accelerating rate over the years. Or decades, if you start early enough.

Time is the operative word here. The longer your money remains invested, the greater the compounding effect.

This is a particularly important lesson for younger savers. Many delay investing in their 20s because they have other priorities. Paradoxically that’s the best time to start.

The first £1 you invest is the most valuable of all, because it has longest to grow.

Say someone invests a £10,000 lump sum at 35 and it grows at an average compound rate of 5% a year, after charges.

By age 65, some 30 years later, it will be worth £43,219. It would have grown more than fourfold, which is pretty impressive.

However, if they’d invested the same sum 10 years earlier, at age 25, they’d have £70,399. Their investment term is just 25% longer, but their money is worth a staggering 62% more. All due to compounding.

That’s roughly in line with the long-term total return on the FTSE 100.

After 40 years, they’d have £149,744. That’s almost than double the £70,399 total, yet the annual percentage growth was just 2% more.

Stocks and shares are more volatile in the shorter term, but over longer periods are far better at building wealth.

The average pension saver hopes to retire on an annual income of £48,868, according to new research from Royal London. This includes the full state pension which is currently £11,542.

To generate that in today’s terms, someone retiring at 67 would need a pension pot of around £696,000, with state pension on top.

That’s a daunting sum and inevitably, most will fall short. That’s despite the success of the auto-enrolment workplace pension scheme.

She said a 22-year-old worker who contributed 8% of their £24,000 starting salary into a pension under auto-enrolment rules would have £468,000 by 67, assuming compound growth of 5% a year after fee

That would give them annual income of £36,600, some £12,200 below that £48,868 target. They’d need to invest more to plug the shortfall.

This shortfall highlights a critical issue: while compound interest can significantly grow our wealth, it cannot compensate for insufficient contributions.

Even miracles require a little human intervention. And the earlier the better

SDCL Efficiency Income Trust plc (“SEIT” or the “Company”)
Update and Disposal

Following the publication of SEIT’s 2025 Annual Results and Accounts on 23 June, both the Investment Manager and independently the Chair (on behalf of the Board) have met with a number of SEIT’s shareholders to present the results and discuss possible strategic options for the Company.

Feedback emphasised the importance of continued portfolio performance and sufficient cash generation to cover the dividend whilst there was also a consensus around the importance of achieving successful asset disposals with benefits of this including a reduction in debt levels, and the opportunity for returning cash to shareholders in due course. 

Accordingly, the Investment Manager has successfully negotiated the sale of its convertible loan in ON Energy to the issuer for $7.6 million, representing an 18.75% premium to the current holding value of $6.4 million and a money on invested capital (“MOIC”) including actual cash receipts to date of 1.63x.

The sale delivers a cash realisation and removes exposure to a business where its geographic focus has shifted away from SEIT’s target markets. The proceeds from the sale will be used to reduce SEIT’s drawings on its revolving credit facility.

Tony Roper, Chair of SEIT, commented:

“The Board remains focussed on finding solutions to narrow the discount the Company’s shares trade at with disposals being key to simplifying the portfolio and reducing debt levels.  The Board is taking a more active role in supporting the disposal processes the Investment Manager is working on and will continue to explore all strategic options to achieve these important objectives.”

Jonathan Maxwell, CEO of SDCL, commented:

“The disposal reflects SEIT’s continued focus on crystallising value for shareholders, managing portfolio construction, and maintaining financial flexibility in a challenging M&A market. Our investment in ON Energy has generated attractive returns for SEIT. It is timely to exit as ON Energy moves on to the next stage of its growth and we are pleased to secure an exit at a significant premium as we continue to work hard to create further liquidity and value.”

Here’s how!

Story by Christopher Ruane

The prospect of becoming a stock market millionaire can seem exciting, but it need not be daunting. In fact, I think one can aim for a million simply by buying and holding a limited number of well-known and long-established blue-chip shares.

What it takes to go from zero to a million

If one seriously wants to become a stock market millionaire, it takes not just ambition but also a practical plan.

Putting in just a few quid and hoping to stumble on some miraculous once-in-a-generation share will not cut the mustard, I reckon.

Not only is a proper investment strategy required — so is capital. It takes money to make money.

That means that, while it is possible to start with zero, a disciplined regular saving plan is a helpful tool to provide money to invest.

Everyone’s financial situation is different and that will affect how much any one person can invest in their share-dealing account or Stocks and Shares ISA. But the short of it is, the more one puts in, the faster one can aim for a million.

Why doing less can earn more

Imagine an investor puts in £800 each month and was able to grow their portfolio value at a compounded value of 5% annually by investing in 50 leading shares.

Doing that to aim for a million, the investor would be opening the champagne after 38 years.

But imagine if they bought just the 7 or 8 best-performing of those 50 shares and achieved a compound annual growth rate of 10%. They would be a millionaire in 26 years. At 15%, it would take just a couple of decades.

How the top shares perform will vary over time. But the same principle always applies: the best-performing few shares in any group (say, the FTSE 100) over a given time period will outperform the rest.

That can speed things up, perhaps significantly, as in the path towards a million.

That is just simple maths. What is not so simple, alas, is knowing (or even guessing well) which shares will be top performers in any given timeframe.

Going for great, nor merely decent

Many investors know the difference between finding what feels like a really good opportunity and a merely decent one. Great ones can be rare: Warren Buffett pins much of his success on “about a dozen truly good decisions” over many decades.

It can therefore feel tempting to invest in merely decent opportunities. But Buffett’s strong performance comes from being patient and going for brilliant chances in a big way.

As an example, consider ExxonMobil (NYSE: XOM).

I expect demand for oil and gas to stay high. For decades people have been talking about use falling – and I do see that as a risk – but so far it has been resilient, as the global population grows.

Exxon is in prime position to benefit from this. It has a more focussed portfolio than some rivals, outstanding assets, and a proven business model over many decades.

In fact, not only has it proven its business over decades, the energy major has grown its dividend annually for decades.

The thing is, although I think it is a great business the share price does not strike me as cheap. So, for now, I am watching without buying.