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I started investing late in life but still managed to generate thousands of pounds in passive income.
And I think it's easier than most people think. Like many readers, I also started with almost nothing.
No savings, no investments and no trust fund. No business interests or property. There is also no rental income for buy to let.
I had the money I made from freelance writing.
But without passive income, I had no safety net to simply enjoy my free time.
That's how I started.
Zero to hero
Depositing small, regular amounts into a tax-advantaged account, such as a stocks and shares ISA or SIPP, is a great way to get up and running.
Please note that tax treatment depends on each client's individual circumstances and may be subject to change in the future. The content of this article is provided for informational purposes only. It is not intended to be, nor does it constitute, any type of tax advice. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
It soon becomes a decent bet without you realizing it. Today I am 42 years old and have around £4,000 of passive income deposited.
Almost exactly half of this comes from increases in the price of the growth stocks I own.
The rest comes from regular income stock dividend payments.
Not all companies pay dividends. These include the biggest names: Amazon, Netflix and the owner of Google Alphabet.
Thirst for growth
It can be frustrating to find a stock you like and see that it doesn't pay a dividend. However, it's not always a binary choice between dividends or growth forever.
For example: One of my best investments didn't pay dividends when I first bought the stock.
However, it will start sending me free cash dividends this year.
This is the £200m market cap viral drug testing company I live (LSE: WHO).
It is negotiated in the AIM market, one step below the FTSE 250.
Buying shares of what was then an unknown penny-per-share stock was pretty scary. But I did a lot of research before buying it.
I listened to investor presentations. I looked at their rival companies to see how fast they could grow. I watched like a hawk to see if management really kept their promises.
Great benefit
Hvivo sales soared from £3.3m in 2019 to £55.5m in 2023.
From losing £5m a year, the company is now making £8m a year in profits.
It is much more profitable for large pharmaceutical companies to use Hvivo models than any other method. That's why Hvivo's pay-up-front clinical model has seen such explosive growth.
So I'll hold this along with my other dividend-paying stocks.
I will use compound growth to my advantage: reinvest any dividend payments into purchasing more shares. For me, that includes a 7.5% dividend from the renewable energy fund. UK Wind Greencoat and the producer of low-cost metals with a dividend yield of 13.8% Sylvania Platinum.
Generating passive income is a way I have used to make my money work for me, and not the other way around. Given my results to date, I don't see myself stopping anytime soon.
