Passive Income?

[MrPickles73]

Has anyone got passive income to work for them?

I have sizeable savings and in theory could live off the income from my savings but a sizeable chunk is still in cash (at almost 0%) and the rest in an ISA with H-L, which make some return but nothing amazing.

Is there anyone out there who's got passive income working for them and where did you start please? Or any books / websites anyone can recommend. I have a subscription to MoneyWeek and Motley Fool. But I need fresh inspiration. I would like to retire or atleast wind back in the next say 5 years.
Thank you.

You need a correctly built portfolio (not an income portfolio, despite what many say - read the research). You then take the gains and dividends to maintain the capital. It's what we do with pension clients all the time.

If you have a balance portfolio, this can be achieved. It's not totally straightforward (I spend my life wrestling with this), but more than achievable.

How much capital do you have?

How old are you?
Do you work?
Is this top up money, or 'the lot'.

How much do you need to survive?
How much do you need to actually have a life?

This would tell me where to start planning.

It have about 500k in total in isa and SIPP.
I work full-time, have my own consultancy and am 47. I would like to retire in the next 5 years. I will get a company pension of 12k and house rental of 10k. No mortgage. On top of that I 'need' an additional 30k.
My husband has his own pension.

Is the additional £30k pa correct, rather than a total? That is a big ask for a £500k pot!

You should also check your pension entitlement - you likely won’t be able to claim until 55 at the earliest (and there is expected to be a change to make this later but not sure when it will come in from) and at a lower level than if you retire at the normal pension age set out in your statements etc.

milinhas so is 6% return unrealistic?

If I count all shares, SIPP and ISA its £750k

Even the 'experts' are only getting about 4% (and with some decline in capital value): www.ii.co.uk/analysis-commentary/11-investment-trusts-ps10000-annual-income-2021-ii514908

6% P.A net is a big ask on a regular basis.
Your SIPP income is also taxable at your highest marginal rate and is not accessible until age 55 at the earliest.
ISA income is tax free

£750K may sound like a lot, but if you are looking for a NET income of £30k PA that may be a stretch.

We use modellers that can show you if this was achieved, and how, looking back over time. You can then look at probability. Anyone that says yes it’s fine, be wary. It could be, but you’ll need equity and it could be a bumpy ride.

Modellers can’t predict the future though. I’ve made more than 6% each year, but I’d never guarantee it. I think you need to do some proper planning with a Chartered Financial Planner.

"Millionaire Teacher" or "Millionaire Teacher" by Andrew Hallam might be interesting reads for you. They are essentially an exploration of how you can use passive investment as a means of building wealth/funding retirement (mostly through investing in ETFs and Index Funds)

I've made an average of >10% a year investing in ETFs since I started 10 years ago.

It's been a great run for the stock market which won't last for ever. However, 6% over the long term is unrealistic by historical standards.

In the current low interest rate environment, you are not going to make those kind of returns without taking on substantial risk. It's reasonable to expect to make 6% on stocks but you may lose 50% or more of your money trying (as happened in 2008 and 2001).

CaribouCarafe thank you I will take a look.

Winebottle if you have any tips let me know. I'm not too concerned about short term ups and downs. I've been investing for over 20 years so have a long term view.

I don't think that level of return is realistic in the long term. My pension returned 11percent in last 12 months but only because it had fallen due to Covid in March. Actual return was closer to 6 percent.

I’m getting at least 8% a year consistantly across my portfolio. I have invested in high risk equity type funds (accumulation or unit trusts) and prefer emerging markets because even with Covid that is where the growth is. It’s supposedly risky doing it that way but only on paper - in reality China and India are fairly stable with the right investments.

I am a bit younger than you but have 160ish in pension, and same again in investments and shares. My focus is on reducing charges, maximising ISA allowances, regularly reviewing investments and minimal cash savings.

I also buy when markets are low and just keep the shares until they grow. Means I get a good amount in dividends which are then just reinvested

High risk equals high reward /.high losses ...