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Stocks and shares fell last week. But for me, this is a great opportunity to start a program of investing £40 a week to build a passive income stream.
There are many ways to earn unearned, passive income. But one of the most accessible is investing money in dividend stocks. I also think it is one of the best and most effective ways.
And a lifelong approach to regular investing has the potential to make a huge difference in my personal finances. For example, if I started at age 20 and continued until age 60, the money could change my money in retirement.
If I was just starting out, my approach would be to add that passive income stream back to my investments along the way. And this helps to facilitate the integration process.
The power of integration
I crunched the numbers into an online calculator. The results are amazing. £40 a week works out to around £174 a month. And for the purpose of the calculation, I assumed an annual return of 7%. The long-term total return of the overall stock market is somewhere in that ballpark. Therefore, the figure is reasonable. However, it is not guaranteed.
However, investing £174 a month and earning an average annual return of 7% for 40 years would yield £432,643, according to the calculator. And that’s enough money to enable my early retirement at age 60. That’s worth £40 a week.
However, the surprising thing is that the total investments made over 40 years add up to just £83,520. The remaining £349,123 is just from building returns each year – this is the amazing power of compounding.
And I think a period of market weakness might be a good time to start. If we find a decline of 20 percent or more in the stock market, the decline is marked as a bear market. And they happen every few years. Brad McMillan – the chief investment officer of the Commonwealth Financial Network – the recent downturn is no different from others before him.
Able to go back
Significant failures a “regular and frequent” Stock market behavior. And As with any downturn, we can reasonably expect the markets to bounce back to some extent.
Meanwhile, I guess there’s luck in that prospect. And that means buying stocks now because there’s a good chance my investment will grow when those stocks return. As expected from Macmillan.
However, such an outcome is not certain. And all shares carry risks and upside potential. However, I will start my program of investing £40 a week immediately. And I target a broadly diversified tracker fund with carefully selected dividend stocks and bond stocks.