Britain might be the best country to earn a passive income

Best country for passive income seekers? This Fool makes the case for the UK with its tax advantaged accounts and plethora of investing options.

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The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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For all its faults, the UK is a pretty good place to earn a passive income.

The UK excels at financial services, meaning modern investing apps like Hargreaves Lansdown or AJ Bell are only a few taps of my smartphone away. 

Not only can I invest in a company at the touch of a button, but competition has driven fees way down with some services not even charging for a trade. 

And throw in the Stocks and Shares ISA, which means investors can sidestep all taxes from passive income along with the hassle of reporting and calculating them too. 

The ISA limits deposits to a generous £20k each year and the benefits last for life. 

It’s probably the best investment wrapper on the planet and anyone (in the UK) can open one. 

With so many income-earning advantages for Britons, why aren’t more people doing it?

Serious cash

Well, a lot of people are! The latest data shows nearly four million people have opened a Stocks and Shares ISA and that number is growing. 

Those who jumped on the ISA train early (the accounts have only been around since 1999) could have stacked up serious cash. Over 4,000 have hit the £1m mark. 

Of course, there are reasons to be cautious too. There’s no such thing as a free lunch and the stock market is proof of that. 

While many people point to average returns of 10% going back decades or even centuries, the day-to-day is volatile. 

The American S&P 500 lost 20% during Covid and 50% during the 2008 recession. Yes, the market recovered from both superbly but it wasn’t obvious that was going to happen at the time. 

The risk of losing money is one reason why the returns tend to be a bit higher, making it a great place to invest for those who can handle the uncertainty. 

So what kind of stocks are good to invest in? Well, the answer depends on the stage of the journey I’m at. 

Not a penny

For example, Tesla (NASDAQ:TSLA) is a stock I own, but it doesn’t pay a dividend and hasn’t returned a single penny to me since I bought it. 

Am I kicking myself? No. 

I’ll be patiently waiting many more years before I withdraw an income so growth stocks like Tesla are a useful part of my portfolio. 

Let’s jump back to the 10% mark, a common target and around the average for investors looking to grow their wealth. 

With stocks like Tesla, already at the forefront of the electric vehicles boom, I’m aiming to earn even more than that.

The company is in the advanced stages of other developments like rolling out charging stations and the eventual shift to automated driving. 

Tesla has plenty of catalysts that could see more growth in the years and decades to come.

There are no guarantees of course, and Tesla has been struggling recently, especially as the cost of materials has rise due to inflation.

It’s a high-risk stock but with a potentially high reward. I’m happy with that.

The best?

And even though Tesla trades in the US, it’s a piece of cake to add the shares to my UK ISA in only a few clicks without worrying about any taxes on earnings. 

Britain might just be the best place in the world to earn a passive income.

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.

John Fieldsend has positions in Tesla. The Motley Fool UK has recommended Aj Bell Plc, Hargreaves Lansdown Plc, and Tesla. 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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