It’s no secret that by making smart investments in the stock market it’s possible to start earning a juicy passive income. This is especially true in the UK, where the London Stock Exchange is home to a massive roster of lucrative yields and dividend opportunities.
In 2025, it doesn’t take that much money to start an investing journey. In fact, as little as a few hundred pounds is enough to get the ball rolling. But let’s say an investor’s aiming to earn an extra £20,000 each year passively. Just how much do they need to invest?
Calculating portfolio size
Historically, over the long term, large-cap UK shares have typically paid an average dividend yield of around 4%. By being a bit more selective versus relying on passive index funds, it’s possible to boost this payout closer to 5% without having to take on excessive additional risk.
If the goal is £20,000 a year, then at a 5% yield, a portfolio would need to be worth around £400,000.
For many, this seems like an unattainable goal. After all, the vast majority of people in Britain don’t have nearly half a million lying around. However, for prudent investors willing to be patient, putting aside £500 a month could be what it takes to turn this fantasy into reality.
Turning £500 a month into £400,000+
Instead of immediately focusing on 5%-yielding stocks, investors at the start of their wealth-building journey can focus on growth-oriented picks. Admittedly, this strategy often results in higher unpleasant volatility. But it also opens the door to the potential for superior gains.
The idea here is to leverage faster growing picks to build up a chunky nest egg, before later reallocating the capital into dividend stocks to start earning a passive income.
Investors who used this tactic with Rightmove (LSE:RMV) back in 2010 are now reaping the rewards. The online property portal has spent the last 15 years securing its dominant sector position. And today it now controls over 80% of the market, often being the first place to search or list residential real estate.
In terms of financials, that’s translated into staggering double-digit growth both for revenue and earnings. For shareholders, that’s generated an average annualised return of 17.4%. And anyone who invested £500 a month at this rate over the last 15 years is now sitting on a £425,700 portfolio capable of generating more than £20,000 in passive income.
Still worth considering?
Even in 2025, Rightmove continues to impress. Real estate agents are upgrading to premium advertising packages on the platform to take advantage of new artificial intelligence (AI) tools and analytics. And with mortgage rates steadily falling, home-buying activity is also starting to warm up again, creating multiple tailwinds for the business.
As such, management recently reiterated its full-year guidance supporting the stock’s near-15% jump since the start of the year. However, the housing landscape remains complex. And should the shifting macroeconomic environment dampen housing transaction volumes, customer spending could stumble, reversing some or potentially all of this year’s double-digit gains.
Nevertheless, for long-term investors, Rightmove’s worth considering, in my opinion. The stock likely won’t continue to deliver 17%+ annualised returns given that it’s now a much larger business. But I believe it can still help investors aim for a chunky passive income.
