How I’d build passive income starting with £15 a week

Instead of labouring for money, passive income simply drops into an account ‘on its own’ — here’s how I’d get money like that.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Passive income text with pin graph chart on business table

Image source: Getty Images

Passive income is unearned income. Imagine that. Instead of labouring away to be paid by the hour or salaried, money simply drops into an account ‘on its own’.

Of course, to get passive income, we usually must give something in the first place. And the thing we give is often an investment of either time or money. For example, you could write a book and collect the royalties when it’s published. Or maybe songwriting is your thing. Perhaps you’re a genius who keeps inventing and patenting things such as the ubiquitous cat’s eyes for roads, or barrows with a big ball instead of wheels.

Inflation Is Coming

Inflation is out of control, and people are running scared. But right now there’s one thing we believe Investors should avoid doing at all costs… and that’s doing nothing. That’s why we’ve put together a special report that uncovers 3 of our top UK and US share ideas to try and best hedge against inflation… and better still, we’re giving it away completely FREE today!

Click here to claim your copy now!

Passive income from stocks and shares

People have made fortunes in passive income doing things like that. But, for me, the best route to passive income is the process of investing in stocks and shares. The great thing about many stock market investments is their potential to pay shareholder dividends. And those dividends tend to arrive as passive income year after year, without us doing anything else.

Sounds great, right? And it is. But before diving in, it’s worth remembering a couple of points. And the first is that companies don’t have to pay dividends. In fact, they sometimes don’t.

Company directors have complete control over whether or not to pay dividends to shareholders. And in uncertain times, they may decide to trim the level of dividends, or stop them altogether. For example, we saw a lot of stalled dividends when the pandemic hit the markets a couple of years ago. However, in many cases, dividends have since restarted.

The second point is that share prices can move down as well as up. And that means we could see an investment decline. For example, I could invest, say £2,000, in shares only to look at my account six months later and see just £1,500. However, the volatility of stocks isn’t always reflected in its dividend record. Often dividend streams continue or even grow while share prices remain weak.

The potential of shares

A third point is that as well as the possibility of shrinking dividend streams and falling share prices, the reverse is true. Dividends can increase year after year and share prices can rise at the same time. And the double effect can lead to growing passive income and a rising investment value over time.

So the important takeaway is that investing in shares leads to dynamic outcomes with risks as well as positive potential. And in that sense, the activity is unlike putting money in a cash savings account where outcomes tend to be steady but underwhelming.

However, I’d embrace the risks of share ownership by investing £15 a week into shares and share-backed investments such as funds. And in an effort to mitigate some of the risks, I’d aim to target quality underlying businesses with decent opportunities for growth. And I’d diversify my investments between several stocks.

For example, I'm keen on these:

Our 5 Top Shares for the New “Green Industrial Revolution"

It was released in November 2020, and make no mistake:

It’s happening.

The UK Government’s 10-point plan for a new “Green Industrial Revolution.”

PriceWaterhouse Coopers believes this trend will cost £400billion…

…That’s just here in Britain over the next 10 years.

Worldwide, the Green Industrial Revolution could be worth TRILLIONS.

It’s why I’m urging all investors to read this special presentation carefully, and learn how you can uncover the 5 companies that we believe are poised to profit from this gargantuan trend ahead!

Access this special "Green Industrial Revolution" presentation now

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Should you invest the value of your investment may rise or fall and your Capital is at Risk. Before investing your individual circumstances should be considered, so you should consider taking independent financial advice.

More on Investing Articles

Young brown woman delighted with what she sees on her screen
Investing Articles

3 easy actions that could boost my stock market returns

The UK stock market is going through a sticky patch so this Fool is looking for ways to improve his…

Read more »

Hispanic man using laptop in home office and drinking coffee
Investing Articles

Boohoo shares: time for me to admit defeat?

This Fool is nursing heavy losses from his Boohoo Group (LON: BOO) shares. Should he sell up and move on?

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

6% dividend yields! 2 cheap UK shares to buy in July

Harshil Patel considers two cheap UK shares paying fairly high dividends. He'd consider them for his Stocks and Shares ISA.

Read more »

Social media and digital online concept, woman using smartphone
Investing Articles

Will Lloyds shares recover in 2022?

Lloyds shares have struggled this year and the looming recession won't help. But I'd still buy them today.

Read more »

Two hands holding champagne glasses toasting each other with Paris in the background
Investing Articles

Can the stock market make me rich even now?

Here are three ways I'm coping with the stock market's recent bout of weakness and aiming to build wealth in…

Read more »

Cogs turning against each other
Investing Articles

3 top investment trusts to buy right now

Investment trusts offer a wide range of options for investors. And in troubled times, they provide some safety through diversification…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

Why hasn’t the FTSE 100 crashed in 2022?

The catastrophic events of 2022 have left investors around the globe fearing the worst for stock markets. And some have…

Read more »

Trader on video call from his home office
Investing Articles

2 inflation-resistant FTSE 100 stocks to buy today

Soaring inflation could dent my returns if I don't take care. Here are two top inflation-resistant FTSE 100 stocks I'd…

Read more »