Published On: Sun, Feb 11th, 2024

Man, 24, invests £12 a day to generate passive income for life and retire early | Personal Finance | Finance


The earlier you start investing, the better. Small, regular sums can roll up over time and generate a heap of passive income in later life without having to lift a finger to earn it.

That’s the philosophy of Brandon Bree, a 24-year-old assistant retail manager from Bournemouth.

He boasts no special investment skills, but wants to achieve “financial freedom”, to give him more control over his life.

Brandon already reckons he is three percent of the way there, and will be able to retire at the time of his choosing.

The FIRE movement, which stands for Financial Independence, Retire Early, has swept the investment world.

Its adherents save early and save hard, with the aim of building pension at a much earlier age than if they followed a more traditional retirement plan.

Instead of splurging they save like crazy instead.

Brandon is a fan. He is pursuing financial independence via the old-fashioned approach of dividend investing.

Dividends are the regular quarterly or twice-yearly payments that companies make to reward shareholders for holding their stock.

Investors typically reinvest their dividends when young to buy even more stock, then draw them as income in retirement.

London’s FTSE 100 pays some of the highest dividends in the world. It currently yields 4.11 percent a year.

READ MORE: Stock market to rally despite Ukraine, Taiwan, inflation and recession

Buying individual company stocks is risky, so Brandon invests in a spread of them through a low cost exchange traded fund (ETF). It’s the cheapest, simplest way to invest in shares.

He invests £200 a month in US-focused fund SPDR S&P UK Dividend Aristocrats ETF and a further £150 in the iShares UK dividend ETF.

These popular funds can be bought in a Stocks & Shares Isa for tax-free income and growth. 

In total, he invests £350 a month through social investment network eToro, which works out at just £11.66 a day. 

If Brandon invests that amound every month and his funds return seven percent a year on average, they will be worth a cool £1.03million by age 65.

If he increased his £350 contribution by three percent every year to keep pace with inflatino, he would have £1.42million. It might also give him the freedom to retire early.

This shows the benefits of investing early rather than delaying until your 30s, 40s or 50s, when contributions have less time to grow.

DON’T MISS:
Financial crisis is a massive opportunity – if you’re feeling ‘greedy’ [INSIGHT]
State pension set to rise by 10.1% but some will get £226 less [EXPERT]
These top ISA funds have crashed by half yet Brits still buy them [GUIDE]

The cost-of-living crisis spurred Brandon to increase his monthly contributions. “Everybody is so worried about money and I don’t want that to be me in the future.”

He adds: “If you see the crisis as a reason to stop investing, then you don’t understand the reason for investing in the first place.”

He already generates passive income of $35 (£32) a month from his US ETF, and the income from his FTSE fund is building.

“I reinvest all my dividends via my eToro account, acquiring more shares which then produce more dividend income.

“It feels great because at the end of each month I get both a pay cheque from my employer and dividend income from my portfolio.”

Sam North, analyst at eToro, says while there are no guarantees when investing, dividend stocks offer consistent payouts with less volatility. “Sectors like utilities and energy have become favourites for dividend hunters, especially this year.”

The latest eToro Retail Investor Beat survey found that one in five UK investors said retiring early was one of their top three objectives.

“Dividend payouts can help investors meet these goals by generating an income both before and during retirement,” North added.





Source link

About the Author

-

Leave a comment

XHTML: You can use these html tags: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>