Earning passive income through investing in blue-chip businesses that pay dividends is a popular strategy for many investors. By building a portfolio of income-generating stocks, investors can create a steady stream of passive income that can grow over time. If you have a spare £9,000 to invest, here is a guide on how you can target more than £100 in passive income each month.
Getting ready to invest
The first step in earning passive income through investing is to set up a share-dealing account or Stocks and Shares ISA. By putting your £9,000 into a brokerage account, you will be ready to start investing as soon as you find attractive income shares to own.
Picking an approach
If you are new to investing, it is important to spend some time learning about important concepts such as valuation and investment strategies. When targeting passive income, you will need to decide on your approach. This includes choosing what sectors to focus on, how many different companies to invest in for diversification, and whether you are willing to invest in low-yield companies with the potential for high rates of dividend growth.
Quality over yield
When selecting income-generating stocks, it is important to focus on the quality of the company rather than just the dividend yield. High-yield companies may seem attractive, but dividends are never guaranteed. It is essential to find companies with strong business models and the potential to generate excess cash flow to fund dividends in the future.
Finding shares to buy
One example of a company with passive income potential is Legal & General (LSE: LGEN). As a financial services provider in the retirement planning industry, Legal & General has a strong brand and customer base that give it a competitive advantage. Despite potential ups and downs in the market, the company’s long-term profitability makes it an attractive investment for passive income seekers.
Reinvesting now to earn more later
With a dividend yield of 8.9%, Legal & General can be a passive income goldmine for investors. By reinvesting dividends over a decade, you can benefit from compounding returns and potentially earn an average passive income of around £103 each month. This strategy allows you to grow your income stream over time and maximize the returns on your initial investment.
In conclusion, earning passive income through investing in income-generating stocks can be a rewarding strategy for investors looking to build a steady stream of income. By focusing on quality companies with strong business models and reinvesting dividends for the long term, you can target more than £100 in passive income each month with a £9,000 investment. Remember to do your research, diversify your portfolio, and stay informed about market trends to make the most of your passive income strategy.
