Earning regular passive income is one of my investment goals. It enables me to develop another source of income from the income from the business. And most importantly, it can support me even after retirement – something I think we should start planning from the day we start making money. In this article, I will go over how I can best earn passive income in 2022.
Why 2022 is a good year to start investing I think 2022 is a particularly good time to start investing for passive income because the dividend yield is going to increase. Dividend yields on FTSE 100 stocks could rise to 4.1% this year from the current 3.4%, according to a recent study by AJ Bell. Given that the economic recovery is set to continue for the foreseeable future, I am also optimistic about the dividend in the medium term.
How much should I invest? Take the stocks with the highest dividend yield, for example. I’m talking about the mining company Evraz, which has a return of about 16%. I need to invest just over £6,250 to get £1,000 of passive income from this stock. This seems like a good deal to me. But herein lies the problem. I can’t just put my money in stock and expect to hit my target amount each month.
Mining profits have soared over the past year as the prices of base metals and other commodities have risen unexpectedly over the past year. Those prices are expected to cool down this year, and I expect earnings to drop as well. This means that I have a choice of two options. I can actively manage my investments and switch to better options when the opportunity presents itself. Or I can invest in a group of stocks that promise lower but more predictable returns.
As mentioned earlier, if I invest in the average FTSE 100 stock, I can expect a return of around 4%. However, to generate £1,000 of passive income from this, I would need to invest £25,000. That’s four times what I would have to invest if I bought the stock with the highest dividend yield today! Despite all the risks, the first option looks much better than this one. But I have a third alternative if you look closely.
My best alternative I can choose carefully from a selection of stocks that will give me a decent return for a while. From utilities to miners and everything in between, I could see at least a 7% return. This would require me to invest around £14,500, which falls somewhere between the two extremes. It goes without saying that with this investment too, it would be worthwhile to regularly keep track of where my money is going. But maybe I don’t have to be as vigilant as if I only invested in one stock.
clause How would I like to make £1,000 in passive income in 2022 first appeared Motley Fall Deutschland.
This article was written by Manika Premsingh in English and On 01/23/2022 at Fool.co.uk chest. It has been translated so our German readers can join the discussion.
Motley Fool UK does not have a position in any of the stocks mentioned. The views about the companies mentioned in this article are those of the author, and therefore may differ from the official recommendations we provide on our subscription services such as Share Advisor, Hidden Winners, and Pro. At The Motley Fool, we believe that by considering a variety of insights, we become better investors.
Motley Fall Deutschland 2022