How I’d invest £99 a month to aim for a passive income of £84,960 a year for life

With as little as £99, it’s possible to generate a five-figure passive income by investing. The secret is to start buying shares as soon as possible.

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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.

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Working for the rest of my life doesn’t exactly sound thrilling, so I fully intend to eventually live on the passive income generated by my investments. And given enough time, even a small monthly contribution can be all that it takes to achieve financial freedom.

There are always stories of a few lucky individuals who get rich quickly in the stock market. But such occurrences are exceptionally rare. And what’s not reported are the countless investors chasing such gargantuan returns only to be left with nothing.

So, instead of relying on lottery-like odds, I’m sticking to a more reliable strategy. I’m steadily building up wealth over time. It’s been just over a decade since I started my personal journey, and I’m fortunate enough to already have a portfolio in six-figure territory. And with another 35 years to go before retirement, I hope to push my nest egg over the multi-million-pound threshold before I’m done.

Should you invest £1,000 in IAG 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 IAG made the list?

See the 6 stocks

Long-term investing

One of the easiest ways to kick-start a portfolio is with a low-cost exchange-traded fund (ETF). Most Britons like to track the FTSE 100 for its reputation of stability. But if growth is the name of the game, tracking the S&P 500 may be the wiser move.

After all, with exposure to tech stocks, the S&P 500 has been able to generate returns closer to 10% versus the FTSE 100’s 8% over the long run. Of course, this does come with higher levels of volatility.

Assuming no hiccups along the way, investing £99 a month for 45 years at this rate translates into a portfolio worth £1,037,770. Following the 4% withdrawal rule, that’s a passive income of £41,510 – not a bad pension plan. But I can potentially do better.

Maximising returns

Instead of relying on passive index funds, I’ve been taking a more active approach. This investing strategy comes with far more responsibility and volatility. But by picking individual stocks it’s enabled my portfolio to achieve market-beating returns. Shopify (NYSE:SHOP) is a good example of this. The shares are up almost 1,200% since my initial investment in 2017, despite the massive tumble it suffered in 2022.

The e-commerce platform has evolved into a mission-critical tool for small and large online retailers, resulting in tremendous growth over the years. Yet its long-term prospects continue to be exciting. That’s why I’ve been steadily topping up my position since its recent nosedive began. But I’m expecting plenty of volatility ahead.

Finding stocks with Shopify-like returns is no easy task. And I’ve made plenty of blunders along the way. However, identifying quality early on and holding for the long run can make an enormous difference to a portfolio’s performance.

Even if I’d only managed to eke out an extra 2% over the S&P 500’s average over 45 years, that’s enough to grow a £2,124,000 nest egg. And in terms of passive income, it’s the equivalent of £84,960 a year.

But what does the head of The Motley Fool’s investing team think?

Should you invest £1,000 in IAG 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 IAG made the list?

See the 6 stocks

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.

Zaven Boyrazian has positions in Shopify. The Motley Fool UK has recommended Shopify. 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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