One possible investing route to earning $1,000 monthly passive income

When you first start investing in ASX shares, it can be very intimidating. Going from zero to something material may seem like an impossible task, but history shows that it most certainly isn’t.

Furthermore, you don’t even need to generate Warren Buffett-style returns to make your wealth creation dreams a reality. Simply matching the market return has created significant wealth for investors in the past. And while I can’t guarantee that it will be the case again in the future, I’m optimistic that it will be.

With that in mind, let’s take a look at one possible investing route to earning $1,000 a month in passive income from ASX shares.

How to earn $1,000 a month from ASX shares

Firstly, if you want to earn $1,000 a month in passive income, you’ll need to pull in a total of $12,000 in dividends from ASX shares each year.

It’s quite easy to find ASX shares that offer investors 5% dividend yields. In fact, the Vanguard Australian Shares High Yield ETF (ASX: VHY) will do this for you (and some more) through a single diversified investment.

Based on this yield, to generate $12,000 of passive income a year, you’ll need to invest approximately $240,000.

Ouch!

That’s a big number if you’re starting at zero. But don’t let that put you off making it a longer-term goal.

According to the latest Berkshire Hathaway (NYSE: BRK.B) letter to shareholders, the S&P 500 Index (INDEXSP: .INX) on Wall Street has delivered an average annual return of 9.9% since all the way back in 1965.

Were ASX shares to generate this level of return for the foreseeable future, you could make your way to the $240,000 sooner than you think without breaking the bank.

For example, investing $500 into ASX shares each month would get you almost halfway there to $100,000 in 10 years if you earned the market return. And thanks to the power of compounding, it won’t take anywhere near as long to make up the rest.

A further six and a half years, so a total of 16.5 years, would see your portfolio grow to the target amount of $240,000.

At that stage, you could build a portfolio or buy an exchange-traded fund (ETF) with a 5% yield and sit back and watch the dividends roll in.

The key is being patient and sticking to the plan, whatever is happening in the market.

The post One possible investing route to earning $1,000 monthly passive income appeared first on The Motley Fool Australia.

(function() {
function setButtonColorDefaults(param, property, defaultValue) {
if( !param || !param.includes(‘#’)) {
var button = document.getElementsByClassName(“pitch-snippet”)[0].getElementsByClassName(“pitch-button”)[0];
button.style[property] = defaultValue;
}
}

setButtonColorDefaults(“#0095C8”, ‘background’, ‘#5FA85D’);
setButtonColorDefaults(“#0095C8”, ‘border-color’, ‘#43A24A’);
setButtonColorDefaults(“#fff”, ‘color’, ‘#fff’);
})()

More reading

• Want $1,000 of passive income? Check out these ASX shares
• 3 ASX dividend ETFs to make nice income
• Market beating returns and big yields: 2 ASX ETFs to buy next week
• Buy this ASX ETF for retirement income
• Is a dividend ETF really better than an ASX index fund for income?

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Berkshire Hathaway. The Motley Fool Australia has recommended Berkshire Hathaway and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

from The Motley Fool Australia https://ift.tt/djhULGy