The Motley Fool

How I’d invest £200 a month in UK shares to make a £12,000 passive income for life

Image source: Getty Images.

Investing £200 per month in UK shares to make a £12,000 passive income may sound like an impossible task after the 2020 stock market crash. After all, the FTSE 100 has declined by around 25% since the start of the year and has recently shown little sign of mounting a sustained recovery.

However, through buying high-quality companies at low prices, diversifying across a wide range of businesses and holding for the long run, an investor could generate impressive returns. Over time, they could amount to a generous income level for the long run.

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...

Buying high-quality UK shares for the long term

The stock market’s track record of recovery suggests that many UK shares are likely to deliver improving performances over the long run. However, the strongest performers may prove to be those businesses that offer the best value for money today.

For example, some stocks have solid financial positions and wide economic moats. Therefore, they are relatively likely to survive the short-term economic challenges that may be ahead, as well as deliver improving financial performances over the long run. They may be able to use their solid balance sheets to make acquisitions while rival companies are cheap. Or, they could benefit from worsening performances among sector peers that increase their market share in the coming months.

Buying such companies while they trade at low prices may allow an investor to obtain the best value UK shares. In other words, the best means of generating a high long-term return may occur where high-quality businesses are trading at low prices. This could lead to strong earnings growth, as well as the potential for a large upward re-rating in a stock’s valuation as investor sentiment gradually improves.

Building a portfolio after the stock market crash

As well as buying the best UK shares at the lowest prices, diversifying across multiple sectors may improve an investor’s long-term passive income prospects. This may reduce risk, but also allow an investor to access growth opportunities that are available in a wide range of industries. Since it is currently difficult to ascertain which sectors will deliver strong performances, spreading the risk across multiple areas could lead to a larger portfolio in the long run.

Even if an investor simply obtains the same rate of return as the wider index, a regular monthly investment could produce a worthwhile nest egg in the long run. In fact, the FTSE 100 has produced an annualised total return of 8% since its inception in 1984. Investing £200 per month at an annual 8% return for 30 years could produce a portfolio valued at £300,000. Withdrawing 4% per annum would lead to a passive income of £12,000 per year, which could grow at an above-inflation pace as the world economy recovers from its decline in 2020.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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

The renowned 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 enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.