How much would a Stocks & Shares ISA investor need for a £500 weekly passive income?

Investing in a selection of global shares, trusts, and ETFs can help Stocks and Shares ISA investors build a large nest egg for retirement.

| 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.

The Stocks and Shares ISA, along with the Cash ISA, can significantly bolster a person’s chances of enjoying a large passive income in retirement.

Why? They give people a chance to save and invest up to £20,000 a year without having to pay capital gains tax (CGT) or dividend tax. Over time, this can save even the average investor tens of thousands of pounds.

But here’s the thing: if not invested sensibly, these tax savings might not be enough to create a sufficient pot for retirement.

Should you invest £1,000 in Central Asia Metals 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 Central Asia Metals Plc made the list?

See the 6 stocks

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Here’s my plan

My own plan is to invest most of my spare cash at the end of the month in shares, trusts, and funds. I use my Stocks and Shares ISA and Self-Invested Personal Pension (SIPP) to do this.

Only a relatively small percentage is held in cash with products like my Cash ISA. This is because of the higher returns I can expect to make with stocks and other exchange-traded products.

On the plus side, my balance in a Cash ISA doesn’t go up and down according to the performance of financial markets. But I know that holding too much in cash could scupper my chances of a healthy income in retirement.

Let me show you how.

Targeting £500 a week

In this example, let’s say an investor is targeting a weekly passive income of £500 in retirement from their ISAs and other investments. That works out at £26,000 a year.

They plan to retire after 25 years, at which point they’ll draw down 4% of their retirement fund a year, ensuring that said fund lasts for around three decades.

To do this, the person would need to invest £525 a month to build a portfolio worth £650,000.

I’ve based this figure on the 9.6% average annual return that Stocks and Shares ISA investors have enjoyed over the past decade.

By comparison, the monthly investment someone would need to achieve that £650k retirement fund would likely be far higher if they used only a Cash ISA instead. Based on a 4% interest rate, they’d need to invest a whopping £1,265 in their savings account each month. It’s a figure that would be unachievable for many people.

A top ETF

As I say, Cash ISAs are great products for minimising risk. But Stocks and Shares ISA holders can reduce the danger to their capital by purchasing a trust or a fund.

The iShares Core MSCI World ETF (LSE:IWDG) is one such product that could help investors chase large returns with less risk than buying individual shares. In total, it spreads investors’ capital across 1,397 companies.

Around 73% of the fund is devoted to US equities, though the rest is invested pretty evenly elsewhere, providing added diversification by geography. These businesses straddle multiple sectors including information technology, financials, consumer discretionary, and healthcare.

I’m especially attracted by its high concentration of fast-growing technology shares. Major names here include Apple, Nvidia, and Microsoft.

Since 2020, this iShares global ETF has delivered an average annual return of 11.2%. Returns may disappoint during economic downturns. But on balance, I think it’s still an attractive option for long-term investors to consider.

Should you buy Central Asia Metals Plc shares today?

Before you decide, please take a moment to review this first.

Because my colleague Mark Rogers – The Motley Fool UK’s Director of Investing – has released this special report.

It’s called ‘5 Stocks for Trying to Build Wealth After 50’.

And it’s yours, free.

Of course, the decade ahead looks hazardous. What with inflation recently hitting 40-year highs, a ‘cost of living crisis’ and threat of a new Cold War, knowing where to invest has never been trickier.

And yet, despite the UK stock market recently hitting a new all-time high, Mark and his team think many shares still trade at a substantial discount, offering savvy investors plenty of potential opportunities to strike.

That’s why now could be an ideal time to secure this valuable investment research.

Mark’s ‘Foolish’ analysts have scoured the markets low and high.

This special report reveals 5 of his favourite long-term ‘Buys’.

Please, don’t make any big decisions before seeing them.

Claim your free copy 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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, Microsoft, and Nvidia. 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

Investing Articles

£20K invested in Tesla stock last April is now worth…

Despite all the bad headlines lately, Tesla stock has put in a storming performance over a 12-month timeframe. Is this…

Read more »

Investing Articles

If a 40 year old invests £600 a month in a SIPP, here’s what they could have by retirement

With no retirement savings at 40, an investor could put £600 a month into a SIPP and grow its value…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Why hasn’t its 9.9% yield boosted the Phoenix share price?

Phoenix Group has a dividend close to double digits, but saw a weak share price performance in recent years. Christopher…

Read more »

Silhouette of a bull standing on top of a landscape with the sun setting behind it
Investing Articles

With average 10% yields, these mid-cap FTSE shares could supercharge a passive income portfolio

Some of the best passive income gems can be found on the UK's smaller indexes like the FTSE 250 and…

Read more »

A coin being dropped into a piggy bank
Investing Articles

As the Barclays share price tanks 19% in 2 days, is this a great buying opportunity?

As a trade war sends the Barclays share price into a tailspin, Andrew Mackie steps back to look at the…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Is Fundsmith Equity still a good choice for a Stocks and Shares ISA in 2025?

Many Britons hold the Fundsmith Equity fund in their Stocks and Shares ISAs. Is this still a good move? Edward…

Read more »

Investing Articles

Nvidia stock is down 24% this year. Time to buy the dip?

Christopher Ruane has been eyeing Nvidia stock as a potential addition to his portfolio for a while. Is a recent…

Read more »

Petrochemical engineer working at night with digital tablet inside oil and gas refinery plant
Investing Articles

Down 25% since January, this resilient dividend stock’s catching my eye

Maintaining the UK’s rail, water, and energy infrastructure isn’t the most exciting business. But it has made this a solid…

Read more »