With the FTSE 100 and the S&P 500 reaching yet more record highs in 2025, more and more folks are seeing the stock markets as a way to unlock passive income. The shift was exemplified by British personal finance guru Martin Lewis’ recent move to start discussing the merits of investing in stocks and shares.
Those living in the UK have access to thousands of companies on the London Stock Exchange, and the tax benefits of the Stocks and Shares ISA. For those with several years of investing time to work with, these advantages can lead to impressive goals such as thousands of pounds a month in income, even for those starting with nothing at all in the bank.
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.
Spectacular investments
The essence of this plan is simple: sidestep around all those investments that sound popular but are unproductive. Throwing a few hundred pounds a month at gold or a savings account isn’t a bad idea, mind you. But these assets don’t produce much, if anything at all, sometimes not even beating inflation.
On the other hand, investing in businesses can be extremely productive. The purpose of a company is to provide products and services that can grow money invested at a rate greater than almost anything else. The returns on investment in the right stock can be remarkable.
Of course, stocks go down as well as up. Some investments can lose all money. There is a higher risk to go with the higher reward.
For example, investing £500 a month can lead to a rather spectacular passive income. How much? Well, that very much depends on whether we are investing in dying companies with no future or world-class businesses with buckets of growth ahead of them.
Success
Take a stock like Games Workshop (LSE GAW). The tabletop gaming company has built a loyal fanbase over the years, expanding into novels, computer games, and even an upcoming TV series starring Henry Cavill.
The success has seen the shares in this British business go up 40 times in value in the last decade. Having even just one or two of these huge winners in an ISA can supercharge that passive income.
How do we identify stocks like this? It’s not a simple task, but the clues are out there.
Personally, I don’t think it’s an accident that Games Workshop still produces all its models on these shores, including in factories around Nottingham.
The willingness of the Warhammer and Warhammer 40k creator to keep manufacturing inside Britain as rivals offshore their factories to cheaper places shows a commitment to quality.
There is a risk of being undercut on price. Games Workshop products are renowned for being expensive. This could push customers to cheaper rivals or 3D printing instead. This might prove especially dangerous for the stock if the cost-of-living crisis worsens.
I do think, though, that customers will always flock to those who have the best brand with the best models and stories. This is a reason why I think Games Workshop is still worth considering.
To go back to our ISA calculation: let’s assume a portfolio can return 10% yearly for an investing period of 25 years. That would result in an ISA worth £616,662. With a smaller drawdown rate of 4% for safety, this could bring in a monthly passive income of £2,056.
