Starting with nothing in the share market can feel like a disadvantage, but it doesn’t have to be.
When it comes to building passive income, what matters most is consistency and a clear plan. Even from $0, it is possible to work towards a meaningful income stream over time with ASX shares.
Here is a simple three-step approach.
Step one: build the habit
The first step is to start investing regularly.
Even small amounts can make a difference when invested consistently. For example, setting aside $500 to $1,000 per month into ASX shares or exchange traded funds (ETFs) can begin to build momentum over time.
The goal at this stage is not income. It is building capital.
By investing regularly, you benefit from compounding and reduce the need to time the market. Over time, this discipline becomes far more important than trying to pick the perfect investments.
Step two: focus on growth first
In the early years, focusing on growth can accelerate your progress.
Targeting an average return of around 10% per annum is a reasonable and achievable long-term goal, though it is never guaranteed. This typically comes from owning high-quality businesses or diversified ETFs that can grow earnings over time.
ASX shares such as Goodman Group (ASX: GMG), REA Group Ltd (ASX: REA), or global ETFs tracking major markets are examples of assets that have historically delivered strong returns.
By reinvesting all returns during this phase, your portfolio can grow much faster than if you were taking income along the way.
Step three: turn capital into passive income
Once your portfolio reaches a meaningful size, you can begin shifting towards income.
If you assume an average dividend yield of 5%, generating $20,000 per year in passive income would require a portfolio of around $400,000.
Reaching this level could take time, but with consistent investing and compounding, it becomes achievable. For example, investing regularly and earning solid returns over a couple of decades can build a portfolio to this level.
In fact, with a 10% average annual return, $500 a month into ASX shares would turn into $400,000 in 21 years.
At that point, you can allocate more of your capital into dividend-paying shares across sectors such as infrastructure, real estate, and consumer staples.
Foolish takeaway
This approach does not rely on timing the market or taking unnecessary risks.
Instead, it focuses on three simple principles: invest consistently, prioritise growth early, and shift to income later.
Starting from $0 may feel like a long road, but with patience and discipline, it can lead to a reliable and growing passive income stream over time.
The post $0 in savings? I’d aim for $20k in annual passive income with 3 simple steps appeared first on The Motley Fool Australia.
Should you invest $1,000 in Goodman Group right now?
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* Returns as of 20 Feb 2026
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More reading
- 5 ASX shares I’d buy with $5,000 today
- Goodman shares hit 52-week low. Can this ASX 200 stock make a comeback?
- 3 ASX shares I’d buy today and not check for a year
- How to survive an ASX share market crash
- How to build $100,000 a year in passive income from ASX shares
Motley Fool contributor James Mickleboro has positions in Goodman Group and REA Group. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goodman Group. The Motley Fool Australia has recommended Goodman Group. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.