Investing in the stock market can be a daunting task for many, especially for those who do not have the time or inclination to constantly monitor company reports and share-price charts. However, a passive approach to stock investing, particularly when focused on collecting income from dividends, can be a successful strategy for long-term growth.
One of the key advantages of passive investing is that it allows investors to build a diversified portfolio of holdings without the need for constant monitoring. By conducting some initial research when choosing businesses and stocks, investors can set themselves up for potential long-term success.
Legendary investors like Warren Buffett have demonstrated the power of long-term investing by consistently outperforming the general stock market. Buffett’s long-term compounded annual gain of nearly 20% is significantly higher than the average annual gain of just over 10% delivered by America’s S&P 500 index since the 1960s.
For many investors, achieving gains compounding at around 10% a year can lead to significant wealth accumulation over time. To maximize these gains, it is important to reinvest passive dividend income back into stocks to keep the portfolio growing.
One stock that stands out as a favorite for passive income investors is Aviva (LSE: AV.), a UK-based insurance, wealth, and retirement business operating in the financial sector. With a forward-looking dividend yield of over 7.5% for 2025 and a relatively low share price, Aviva presents an attractive opportunity for income-focused investors.
However, it is important to note that investing in stocks carries inherent risks. Company directors have the authority to adjust or suspend dividends at their discretion, and share prices can fluctuate based on market conditions. Additionally, companies like Aviva with operations sensitive to economic cycles may experience volatility in profits during economic downturns.
Despite these risks, Aviva’s track record of dividend growth and positive outlook make it a compelling investment option for passive income investors. City analysts expect further dividend increases in 2024 and 2025, indicating confidence in the company’s underlying operations.
In conclusion, passive income investing can be a lucrative strategy for investors looking to build wealth over the long term. By reinvesting dividends and carefully selecting stocks like Aviva, investors can potentially achieve steady income growth and capital appreciation. While risks are inherent in stock market investing, conducting thorough research and diversifying holdings can help mitigate these risks and maximize returns.
