One benefit of ageing is that my family’s passive income keeps growing. Though my wife and I both work, we boost our earnings with non-work income. In time, this extra income will eventually replace our salaries, allowing us to retire in style. But where did it all come from?
Making money work
Of course, collecting unearned income isn’t a breeze. Making money involves time, effort, and upfront work. Also, lifelong learning about capital markets has helped me make better financial decisions.
After creating a broad financial plan, I then had to manage and nurture it. My most important choice was which assets to own for passive income. My wife and I rejected being buy-to-let landlords — too much hassle. And I don’t know anyone who got rich saving solely in cash, though we do have a rainy-day pot of savings.
The secret to our success has been to invest as much as possible into stocks and shares. By doing this, we build wealth through capital gains (profits made from selling at higher prices) and dividends — cash payouts made to shareholders by companies.
Delicious dividends
In life, there’s no such thing as a free lunch, plus get-rich-quick schemes rarely come with solid guarantees. By owning a large, diversified (widely spread) portfolio of shares, we do take the risk of making hefty losses. For example, in the stock-market crashes of 2000/03 and 2007/09, our net worth took a beating.
Alas, most stocks listed in London don’t pay out dividends. In addition, these cash payouts are not guaranteed, so they can be cut or cancelled at any time. Even so, our dividend income can exceed £10k a month. However, we don’t spend this cash, preferring to immediately reinvest it by buying more shares.
In short, we’ve tried to stack the odds in our favour by playing a long game, while minimising our investment costs and taxes. As a result, we could both have retired in 2021, but we choose to keep working until we are ready to quit.
Phoenix rising
For example, one stock our family portfolio owns for its market-beating passive income is Phoenix Group Holdings (LSE: PHNX). This FTSE 100 firm buys, manages, and runs off books of insurance policies and pensions. Today, it is a leading UK player in the long-term savings and retirement industry.
Asset management can be a highly profitable line of business, which is the case for Phoenix. As I write, the shares stand at 692p, valuing this group at almost £7bn. This stock is up 34% over one year — good news for my family, as we bought our shares at 514.9p a share in August 2023.
Despite this strong rise in its share price in 2025, Phoenix stock offers a bumper dividend yield of 7.9% — one of the highest in the London stock market. To me, this generous cash yield more than makes up for the risk of owning this business.
Then again, Phoenix is a mere minnow in the global market for asset management. As a result, it faces tough competition, as well as declining fund fees. And the next market meltdown is likely to slash its profits and cash flow. Still, this risk is cushioned by the firm’s growing cash pile, so we will hold tight. But what other great investments are hiding out there?
