No savings? Here’s how I’d aim for a second income of £7,120 by 2024

Earning a second income doesn’t require huge savings or an ability to time markets. What it needs is patience, discipline, and commitment.

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Investing £1,000 a month for 10 years at an average annual return of 5% can result in a second income of £7,120 per year. And I think 5% is highly achievable. 

There are a couple of rules investors need to pay attention to. But earning passive income through the stock market isn’t just for those with huge amounts in savings. 

Invest regularly

The key to going from nothing to £7,210 per year is investing regularly. A great way of doing this without relying on cash in the bank is by using part of a monthly salary. 

Should you invest £1,000 in Barclays right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Barclays made the list?

See the 6 stocks

Setting aside £1,000 per month and investing it is the most important thing. Being willing to look for opportunities whether the market is up or down can be crucial. 

That isn’t always easy – when share prices are up it can be tempting to wait for them to come back down. And when stocks have been falling it’s natural to wait for signs of a recovery.

Neither of these is a good idea, though. Stocks that have gone up may not come back to their previous levels and fallen shares moving higher means the best time to buy may have passed.

Be opportunistic

Different stocks are popular with investors at different times – this is what creates buying opportunities. One of the best examples of this is Meta Platforms (NASDAQ:META). 

Created with Highcharts 11.4.3Meta Platforms PriceZoom1M3M6MYTD1Y5Y10YALL15 Jun 201915 Jun 2024Zoom ▾Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '242020202020212021202220222023202320242024www.fool.co.uk

Meta is in a good position – the company is performing well and it’s at the leading edge of the artificial intelligence movement. But things weren’t looking so positive 18 months ago.

In November 2022, Meta was burning cash through its Reality Labs division, losing users on Facebook, and Apple was threatening its ability to track its users. How times have changed.

The stock’s price-to-earnings (P/E) ratio has gone from 11 to 29 over that time. It’s not so attractive to buy right now, but the point is even the best businesses are cheap sometimes. 

Putting it all together

So where should investors look now? My pick for a 5% yield would be Primary Health Properties (LSE:PHP) – a FTSE 250 real estate investment trust that leases GP surgeries.

The stock is down 12% since the start of the year, meaning the dividend yield is actually 6.7%. But I think investors are overestimating the risks with the business. 

Created with Highcharts 11.4.3Primary Health Properties Plc PriceZoom1M3M6MYTD1Y5Y10YALL15 Jun 201915 Jun 2024Zoom ▾Jul '19Jan '20Jul '20Jan '21Jul '21Jan '22Jul '22Jan '23Jul '23Jan '242020202020212021202220222023202320242024www.fool.co.uk

The biggest reason for concern with the stock is its debt. Every time the prospect of interest rate cuts moves further into the future, the share price comes down.

I think the market is overestimating the danger. The risk of unpaid rent is low, demand is strong, and issuing shares to fix the balance sheet would leave the dividend yield fairly high.

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.

Getting started

With no savings, I’d use £1,000 of my monthly salary to buy 1,095 shares in Primary Health Properties. This would get me started on the way to earning a second income.

I’d look to build a diversified portfolio over time. But I think the best way of doing this is by taking advantage of the best opportunities I can find each month.

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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.

Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool's board of directors. Stephen Wright has positions in Apple and Primary Health Properties Plc. The Motley Fool UK has recommended Apple, Meta Platforms, and Primary Health Properties 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.

Like buying £1 for 51p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this recent ‘Best Buy Now’ has a price/book ratio of 0.51. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 51p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 8.5%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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