Invest a Stocks and Shares ISA to earn lifelong passive income? Here’s how!

By investing his Stocks and Shares ISA in the right way, our writer reckons he could earn passive income for a lifetime from money invested today.

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A Stocks and Shares ISA can be a long-term investment vehicle.

Over the long term, I would like to earn passive income. In fact, it would be ideal if that income could grow over time. That would help me manage some of life’s expenses, especially if they increase in price due to inflation.

If I wanted to invest an ISA with that objective in mind, here is how I would do it.

First catch your hare

My starting point would be to have a Stocks and Shares ISA.

While that is obvious, it is important too. There are lots of ISAs available on the market and many have their own pros and cons.

So I would want to find one that seemed well-suited to my own specific investment objectives.

Consider risk tolerance

Risk always matters when it comes to investing. With a long-term timescale, the way I think about risk may change.

For example, a once in a century event may sound unlikely.  

But if I lease a building with a one-hundred year leasehold and know at some point in that timeframe it will definitely be hit by a storm, the risk suddenly seems very real.

If I want lifelong passive income, I would definitely diversify my Stocks and Shares ISA across a range of companies and business areas. I would also ask myself how likely a business is still to be around 40 or 50 years from now.

In reality, nobody knows what may happen. If I already have doubts now about whether a business will survive the next 50 years, though, I might not want to invest in it with lifelong passive income as my objective.

Find compelling business models

Sometimes a company does well, but not because it has a brilliant business model.

It might just be tapping into a faddish consumer trend, for example, or using financial engineering that may not work across the economic cycle.

So I would try to stuff my ISA full of businesses I think have business models that look set to endure.

Take Unilever (LSE: ULVR) as an example.

Its business model is based on coming up with products for everyday needs like washing hair. I expect such needs to persist indefinitely.

By developing proprietary technology and premium brands, Unilever can use its marketing and distribution muscle to generate big profits. Last year, the company made €7.1bn in profits after tax. Not bad for flogging soap and sauces!

Tastes may change and brands might come in and out of fashion. Those are risks to sales and profits at Unilever.

But the basic business model has been working since Lever Brothers opened its doors 139 years ago. I expect it will continue doing so, to a greater or lesser extent.

If I had spare cash to invest, I would happily add Unilever to my Stocks and Shares ISA.

I think shares like that could still be generating passive income for shareholders decades from now.

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 assessed. Consider taking independent financial advice.

C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever Plc. 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.

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