The Motley Fool

How to make money while you sleep

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.

Hedge shaped as the pound symbol inside a glass piggy bank
Image source: Getty Images.

Want a relatively fuss-free way of dramatically increasing your wealth with minimal effort? No problem. In contrast to what some in the financial world will tell you, making money from investing can be devilishly simple. You can even earn while you sleep.

Get efficient

The first step isn’t exactly revelatory.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

At the Fool, we’re continually banging on about the benefits of holding all your investments in a tax-efficient account such as a stocks and shares ISA. Not only does this protect any profits you make from income and capital gains tax, you always have access to that capital should you need it. Right now, you can invest up to £20,000 in a single year. Taking as much advantage of this allowance now can pay off over the long term.

For those that already have an ISA or are confident they won’t require access to their capital for many years, there is another option. Enter the SIPP — or Self-Invested Personal Pension. 

SIPPs are an ideal, low-cost solution for those wanting to invest for the long term. In addition to being exempt from capital gains and income tax, you get tax relief on any contributions you make at your marginal rate. So, someone making an annual contribution of, say, £800 will receive an extra £200, based on a 20% marginal rate of tax. Higher rate taxpayers get an even better deal. To end up with £1000 in their pension pot, they need only contribute £600.

The benefits don’t stop there. Having a SIPP allows you complete control of your money and the opportunity to invest in a far greater range of assets than your typical mainstream pension plans. As well as being able to transfer in an existing pension, a SIPP also permits new contributions of up to £40,000 a year.

Receive, reinvest, repeat

Having set up and begun contributing to a SIPP or an ISA, you can begin generating a second stream of cash by investing in a decent-sized and sufficiently diversified basket of income-generating shares.

The beauty of adopting a dividend-focused strategy to investing is that you get paid while you’re busy getting on with life. As a part-owner of a business, you receive your share of profits that it makes regardless of whether you’re playing your favourite sport, having a coffee with friends or tucked up, counting sheep under a duvet. It’s the very definition of passive income.

As a dividend investor, there’s also no shortage of resilient, cash-generative businesses out there to buy. Oil giant Royal Dutch Shell hasn’t cut its payouts since the Second World War. Right now, its shares yield just shy of 6% — well over four times greater than the interest rate offered on the best cash savings account. Holders of stocks in power provider National Grid will get 6.3% based on its current share price; owners of Lloyds Bank will receive a forecast 6.8% this year.

Regardless of which investments you pick, the only thing you need to do in order to benefit from the beauty of compounding is reinvest what you receive back into the market. Given that you can only access your benefits (and withdraw 25% of your fund tax-free) from the age of 55, this is arguably much easier to do with a SIPP. Investing with an ISA will require a little more willpower.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Royal Dutch Shell B. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.