We haven’t reached Christmas yet, never mind the new year, yet here I am banging on about investing for passive income in 2025. Is there no let-up?
Well, investing, like all things, shouldn’t take over our lives. Instead, we should use it to improve them. And our lives aren’t things that happen 20 years in the future, they’re happening now.
So I’m not one of those investors we read about who lived the lives of paupers so they could build enough cash to keep the local hamster sanctuary in straw for the next 50 years when they die.
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Balance
No, I’d say the first part of investing is balance. Whether we want to build passive income for retirement or seek multibagger growth stocks, we should live for today too.
So that’s my first step for 2025. I’ll invest as much as I can comfortably afford, but I’m not going to leave myself short.
What’s my next step? I’m not going to rush to invest either. I’m happy to put some cash away each month into my Stock and Shares ISA, and let it build until there’s something I’m sure I want to buy.
I’ve seen too many people with money to invest and it burns a hole in their ISA. They pick the best stock they can find on the day, even if it’s not one of their all-time favourites.
Be selective
I’m very selective on the stocks I buy. And if nothing really grabs me, the cash will still be there next month, or the month after.
I’ll tell you one stock I do like the look of right now, and that’s Merchants Trust (LSE: MRCH). It’s an investment trust that targets income from UK equities. And at the moment, it’s offering a 5% dividend yield.
What’s more, it’s lifted its dividend every year for 42 years in a row. That’s something I like about investment trusts for generating steady income. They can retain cash in better years to keep the dividends going when things are leaner.
Saying that, should the trust be unable to raise its dividend one year, I could see the share price tumbling. And I reckon that’s the biggest risk.
Diversify
Diversification‘s a core part of my passive income investing strategy. And I’d get some with Merchants Trust. It has GSK, British American Tobacco, Shell, Barclays and WPP as its top five holdings.
That’s diversification in one go. And I’d be doing better than that, as I’ve already bought some City of London Investment Trust shares. It has a similar strategy, and I think the two should see me well covered in terms of top FTSE 100 dividend stocks.
After that, it’s just a case of accumulating cash and investing only when a really great stock catches my eye.
Overall, my ISA buys have pretty much balanced between investment trusts and individual stocks. And as investing strategies go, I don’t find it too time consuming. It still leaves plenty of time for life.
