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Personally, I prefer to invest in stocks and shares for a second income rather than buying a rental property or something similar.
Why that? Well, investing in the stock market is one of the most passive ways to earn a second income.
I don't need to worry about leaving gaps or having to do any manual work. It's all about doing your research and hitting the “buy” and “sell” buttons.
Additionally, there is certainly capacity for much higher returns. In fact, I've been tracking a portfolio that's up 75% in 18 months.
This is clearly an extreme example of the success that investors can achieve. However, I stand by my original comment: it is easier to make money in stocks than in houses.
Starting
Embarking on an investment journey can be daunting. However, you could start small and prioritize education.
After opening an account at a major investment platform, the next step is to set clear financial goals and evaluate my risk tolerance.
This involves defining what I intend to achieve through investments and understanding what market volatility I am comfortable with.
Depending on my objectives and risk exposure, I can explore various investment options, such as stocks, bonds or funds, allowing me to diversify my portfolio and manage risk effectively.
As I gain experience and confidence, I can gradually adjust my strategy and increase my investment contributions, encouraging a strong and informed approach to wealth creation.
Effective strategies
At £10,000-£15,000, I have a great starting point. It's more than most Brits have in savings. So how could you turn that into a second income?
Well, for starters, you would need to build wealth. Unfortunately, the passive income I could generate between £10,000 and £15,000 won't change my life, but over time it might.
Thanks to the power of compounding, reinvesting even modest returns over time can significantly amplify wealth. In simple terms, to practice compounding I need to reinvest my profits year after year.
As your initial investment grows, so does your income potential, fostering a gradual but impactful financial transformation.
I may also feel inclined to contribute monthly to help my portfolio grow. Take a look at what would happen if you could earn an 8% return annually while also contributing £100 a month. I'm using £12,500 as a starting figure.
After 30 years, he would have almost £300,000. And with £300,000, you could make around £21,800 a year in year 30.
Make wise decisions
The only problem is that many novice investors lose money. And if I lose 50%, I have to win 100% to get back to where I was.
The key is research. By thoroughly researching my investments and using platforms like The Motley FoolI can make better investment decisions.
This may include practicing pound-cost averaging or using a value investing approach. There is certainly a lot to learn, but there are a lot of resources that can help me.
