Here’s how I’d target a £1,890 second income by investing £35 a week

Christopher Ruane explains how, for a fiver a day, he’d aim to build a second income of almost £1,900 in a little over a decade.

| More on:
Close-up of British bank notes

Image source: Getty Images

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.

Read More

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

A second income could come in as a handy supplement when it comes to everyday expenses, or special splurges.

One way to earn a second income is to invest in shares that pay dividends.

That approach has some pros and cons. Cons include that it takes money to invest and dividends are never guaranteed. On the plus side, this approach can be very lucrative — and does not involve extra work in the way that taking on a second job would do.

Although it takes money to invest, I would not need to have much money upfront.

I could start with zero, drip feed money in and invest as I go. Here is an example of how I could do that with £35 a week to try and earn £1,890 in annual passive income over the long term.

Setting up a way to invest

My first move would be to set up an account through which I could buy shares.

For that reason, I would set up a share-dealing account or Stocks and Shares ISA.

Everyone’s financial circumstances are different and there are a lot of choices available, so I would take time to find the one I felt best suited my own needs.

Finding shares to buy

Next would be what many people think of when it comes to investing: looking for shares to buy.

I would look for companies with proven business models built around competitive advantages in an area I expect to experience ongoing high customer demand.

One dividend share I own

As an example, consider one share that helps me earn a second income at the moment: M&G (LSE: MNG).

It may not be as exciting as Amazon or Tesla. But unlike them, it pays dividends. In fact, the dividend yield is 9.6%. The company also aims to maintain or increase its dividend per share each year.

That is an appealing policy. But as dividends are never guaranteed, it is always important to look at the strength of the business and whether it seems likely to support future dividends.

M&G benefits from large demand in its business area of asset management, something I expect to continue over the long term. It can benefit from that thanks to a strong brand and customer base in the millions spread across more than two dozen markets.

Weak economies could lead some customers to withdraw funds, hurting profits. But in the long run, I think M&G has substantial income potential for a private investor like me.

Aiming for a target

M&G’s dividend is higher than many FTSE 100 peers. But I think I could build a diversified portfolio of quality shares in my ISA with an average yield of 7%.

Putting £35 each week into that and initially reinvesting the dividends, then after 11 years I would hopefully have a portfolio earning me a second income of over £1,890 per year.

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 Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. C Ruane has positions in M&g Plc. The Motley Fool UK has recommended Amazon, M&g 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.

More on Investing Articles

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Revealed! One of the hottest growth, value, and dividend shares to buy today

This high-dividend, low-cost company is also one of the London stock market's most exciting growth shares, writes Royston Wild.

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d target a £2,219 monthly passive income with FTSE 100 shares

Investing in FTSE 100 shares can be a great way to turn a regular investment into a life-changing passive income…

Read more »

Investing Articles

These are the most popular 2024 Stocks and Shares ISA picks so far

After a few tough years, it looks like the 2024 Stocks and Shares ISA season is getting off to a…

Read more »

Investing Articles

This FTSE 100 ETF may be the simplest way to become a stock market millionaire

Ben McPoland considers one very straightforward stock market investing strategy that could lead to a million-pound portfolio.

Read more »

Investing Articles

I’d buy 11,220 Legal & General shares for £200 a month in passive income

Our writer considers how much money investors would have to put into Legal & General (LON:LGEN) shares to target £2,400…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

These 2 magnificent FTSE 250 shares are on sale right now!

These FTSE 250 companies still look cheap, despite recent share price gains. Here's why our writer Royston Wild thinks they’re…

Read more »

Blue NIO sports car in Oslo showroom
Growth Shares

Down 36% in 2024, how low could NIO shares go?

The electric vehicle sector has seen some tremendous volatility in recent years, but what does the future hold for NIO…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

£5,000 in savings? Here is how I would invest in income shares

This Fool has been searching for ways to generate a passive return via income shares.

Read more »