£ 9k savings? This is how that could produce £ 108 per month in passive income

Putting some savings to work can be a simple way to establish passive income flows. For example, by investing £ 9k in a variety of dividend shares, I think someone could sign up realistically £ 108 every month on average in passive income.

Here is how.

Configuration of a passive income machine, thanks to dividend shares

In my example, I make three key assumptions. One is an annual growth rate composed of 6%. That seems plausible in the current market, even while investing in blue chips shares.

The second assumption is that dividends are initially reinvested (compounds) and, after a period of time, the portfolio is reinvested (if necessary) in dividend shares that produce an average of 6%.

It could have been like this all the time, but it could also have been that part of the growth came from the increase in the price of the shares. When the time comes to extract passive income, the entire portfolio must be flexible 6%, not only composed in value At that level.

The third assumption is that the investor stops worsening and begins to receive passive income after 15 years. This is a severe income construction plan, not a get Rich-Rich-Cick's charlatanería.

The same approach could be applied much earlier, but the 15 -year period should allow greater passive income than, for example, to wait only two or three years.

A 6% dividend yield is possible, while the laser focuses on quality

At the moment, the blue chip Ftse 100 The main actions index produces 3.4%. So, the 6% objective I use here is quite aggressive. But I think you can even achieve FTSE 100 members.

For example, I have actions in Legal and general (LSE: LGEN). At the moment, it produces 8.6%. Even better, the financial services firm has established plans to continue increasing its dividend by action annually, as it has done in recent years.

Now, this month has also established plans to sell its American protection business. While that could increase the yields of short -term shareholders, it will probably also mean a lower long -term cash generation for the smallest company. That is a risk to the perspective of long -term dividends.

But I think there is much to like legal & general and has no plans to sell my actions. Its target market is large and, thanks to its powerful brand and its large customer base, it has a strong competitive position.

As the recent news demonstrated, management focuses on the returns of the shareholders. From a passive income perspective, I think it is good news for me and many other small private shareholders that receive dividends from the company without working for them.

Convert savings into a income machine

Of course, although that is all in theory, to join legal & general dividends or any other company, a possible investor must become a real investor.

For the ball around, they could put the £ 9K in an account of actions or actions and actions of ISA, so they are ready to invest.