£ 10,000 to invest? This is how an investor could try to turn that into a second income of £ 2,000

Investing in the stock market can be an excellent way to obtain a second income. But investors should carefully think about the best available opportunities.

Dividend stocks can be an excellent choice. But they are not the only way to generate income from an investment portfolio and may not even be the best.

There is more than one way to get effective from a wallet. And doing so selling part of a participation in a company can be advantageous from a fiscal perspective.

Taxes

An action and shares and ISA is a great asset for investors. But it is not an option for everyone and for those who have to invest without one, it is important to think about tax implications.

In general, there are two ways in which investors can find themselves having to give their returns to the government. The first is the Dividend Tax and the second is through capital gains taxes.

A big difference between the two are tax -free thresholds. This is much higher in the case of capital profits (£ 3,000) than dividends (£ 500), which can be significant for investors.

Basic rate taxpayers seek to generate £ 2,000 from an investment of £ 10,000 have an option. They can search for companies that pay dividends or focus on capital gains (or both).

There are two disadvantages in the dividend approach: our objective of £ 2,000 is above the tax threshold and it is difficult to find that type of yield. But none of these applies to the capital gain strategy.

Keep in mind that tax treatment depends on the individual circumstances of each client and may be subject to changes in the future. The content in this article is provided only for information purposes. It is not intended to be, it does not constitute any form of fiscal advice. Readers are responsible for carrying out their own due diligence and obtaining professional advice before making investment decisions.

Capital gains

A return of £ 2,000 in an investment of £ 10,000 translates into a 20%yield, which is huge. But there is an action where I think it could be a genuine possibility.

3I (LSE: III) is a Ftse 100 Private capital signature. And the increase in the company's book value, the difference between its assets and its liabilities, has grown to almost 20% per year.

In other words, someone who had 1% of the business in 2015 has been able to sell 20% of its participation every year and still has an investment with the same value. That is important.

An investment of £ 10,000 is sufficient to generate £ 2,000 per year. The fluctuating prices of the actions mean that this cannot be guaranteed, but I believe that the business has shown that it has a sustainable competitive advantage.

Growth

The key to the impressive growth of 3I has been the success of its investments. And it has a unique approach that distinguishes it from other private capital firms on this front.

It is easy for private capital companies that are attacked by buying at wrong times. Investors are usually more communicated when things are going well, but this generally means that prices are high.

Unlike his rivals, 3I focuses on investing his own money, instead of taking customer capital. This allows it to be more selective to search for opportunities at the right time.

The risk with this is that it can lead to a highly concentrated portfolio, which has happened with 3I. Therefore, investors who consider shares should think about it as part of a portfolio with other assets.