Here’s how to cut a coffee a day and invest in 2 stocks a month to aim for a £65k second income

Millions of us would love a second income, but it’s easier to achieve than we may realise. Dr James Fox talks us through a simple strategy for potential success.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

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.

Saving £4 a day by skipping daily coffee shop visits could be a powerful way to build a substantial second income through strategic investing. It might not sounds like much, but these investments could build over time resulting in a second income worth £65,000!

Here’s how investors can make it happen.

Investing with a model for success

By foregoing that £4 each day, investors can save £120 a month, or £1,460 a year. While this may not seem like much initially, when invested wisely, these savings can grow substantially, due to the power of compound interest. And in order to build a diversified portfolio, every month, investors can pick two stocks.

Should you invest £1,000 in Burberry Group Plc 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 Burberry Group Plc made the list?

See the 6 stocks

Of course, the growth of investments will be dependent on the quality of those investment decisions. Poor investments decisions will result in investors losing money. However, with wise investments, £4 a day could be worth nearly £900,000 after 30 years. That’s assuming a strong 15% annual growth rate — which could generate around £65,000 as a second income.

Admittedly, 15%’s an ambitious long-term rate of growth. At a growth rate of 5%, investors could generate £10,000 per year after 30 years, while 7% growth could lead to £15,000 in annual income. And investors may lose money if they make poor investment decisions.

However, wise investments may generate those stronger returns. Over the last year I’ve managed more than 50%, although this incredible pace will be unsustainable in the long run.

Personally, I employ a model to choose investments that focuses on valuations, revisions to earnings estimates, share price momentum — as we don’t want to wait too long for growth — profitability, and growth expectations. Some investors may prefer other models, such as a deep value approach, putting less emphasis on momentum.

A stock worthy of consideration

So what stock could generate strong returns for investors? Well, airlines are among the best-ranking sectors at the moment, offering attractive valuations while benefitting from share price momentum going into 2025.

As such, investors may wish to consider IAG (LSE:IAG) shares this month.

The stock has great momentum with investors increasing bullish about the company’s trajectory. This is matched by valuation data. At 6.8 times forward earnings, the stock is substantially cheaper than peers including Ryanair, Delta, and Qantas.

Moreover, the firm that owns British Airways also boasts great margins and is expected to deliver strong revenue growth, likely a reflection of its fuel hedging strategy and its broad product offerings.

Nonetheless, as investors, we’ve always got to be wary of what might go wrong. This could include higher for longer interest rates which would reduce discretionary spending or even future Covid flare-ups.

However, the forecasts are positive for IAG with one notable area being fuel. Jet fuel prices are the lowest they’ve been in two years and with talk of an oil glut in 2025, it’s possible that they could fall further. For context, fuel accounts for around 25% of operating costs.

Should you buy Burberry Group Plc now?

Don’t make any big decisions yet.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — has revealed 5 Shares for the Future of Energy.

And he believes they could bring spectacular returns over the next decade.

Since the war in Ukraine, nations everywhere are scrambling for energy independence, he says. Meanwhile, they’re hellbent on achieving net zero emissions. No guarantees, but history shows...

When such enormous changes hit a big industry, informed investors can potentially get rich.

So, with his new report, Mark’s aiming to put more investors in this enviable position.

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation 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.

James Fox has positions in International Consolidated Airlines Group. The Motley Fool UK has no position in any of the shares mentioned. 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.

Pound coins for sale — 51 pence?

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

More on Investing Articles

Investing Articles

1 key fact to remember in this stock market correction

This writer takes a look at a FTSE 100 investment trust that is catching his eye after the recent massive…

Read more »

Investing Articles

I was wrong about the Tesla stock price!

Tesla stock's been affected more than most by ‘Liberation Day’. But our writer has other concerns about Elon Musk’s company.

Read more »

Investing Articles

What’s happening to the Rolls-Royce share price now?

The Rolls-Royce share price has taken a knock from US trade tariffs, but it's still gained more than 50% in…

Read more »

Investing Articles

10 UK shares that are 50% or more off their 52-week highs

These UK shares have been hit hard. And Edward Sheldon believes there could be some opportunities for those with a…

Read more »

Man smiling and working on laptop
Investing Articles

Could IAG’s share price surge over the next year? These analysts think so!

IAG's share price has sunk, reflecting growing concerns over the impact of trade wars on airline profits. Is this a…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

£10,000 invested in Apple shares last week is now worth…

Apple shares are down 18% over the past week. It’s a truly phenomenal downward movement, but investors may want to…

Read more »

Investing Articles

Are shares like Tesco a safe haven for investors?

Christopher Ruane sees a lot to like about Tesco shares. But does he see them as a safe heaven in…

Read more »

Young mixed-race woman looking out of the window with a look of consternation on her face
Investing Articles

The 2025 stock market sell-off could be a once-in-a-decade opportunity to build wealth in an ISA

If a long-term investor has cash sitting in an investment ISA, now could be a good time to put some…

Read more »