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Some people think they need tens of thousands of pounds before it makes sense to invest in the stock market. This is not the case, as even a small sum can grow over time, especially if the stocks bought can generate good returns through dividend payments.
Here’s how an investor can make an income with just £5 a day.
Points to remember
Given the cost of buying stock through a broker or investment platform, buying new stock for £5 each day doesn’t make sense. Instead, I think it’s better to put £5 each day into an ISA or other account. At the end of each month, the money collected can be used to buy stock. Typically, this would mean using £150 saved to buy it. This means that the money is more manageable and makes it worth it.
If an investor focuses on buying dividend stocks, they can target an average dividend yield of 6%-8%. Currently, there are 43 different companies in the country FTSE 100 again FTSE 250 with a yield of more than 6%, so there is plenty to choose from.
Assuming the investor continued to deposit £5 each day and made it a habit, things could grow over time. For example, with an average portfolio yield of 7%, after seven years the pot would be worth £16.4k, generating £1,042 in dividends that year. Until then, dividends will be reinvested. This helps compound the benefits quickly.
Of course, benefits are not guaranteed. Companies can have good years and bad years, and during bad years, there is a risk that the dividend is cut. If so, reaching a four-figure income can take a long time.
A high yield asset option
Another important part of the strategy is choosing the right companies. Another one to consider Workplace group (LSE:WKP). A real estate investment trust (REIT) owns and manages flexible office space and business buildings.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
The main business model is focused on collecting rent from tenants. However, it also aims to capitalize on rising property values by renovating and redeveloping assets.
Over the past year, the stock is down 18%, which may worry some investors. This has been due to a drop in office prices across London, which has come under pressure due to weak demand.
While this remains a risk going forward, I think we will see businesses continue to seek to move back to the office for more employees in the coming years. Therefore, the decline of the stock, which has contributed to the increase of the dividend yield, can be a dip for you to consider buying.
As for the profit, it remained strong despite the decline in the portfolio value. The latest half-year results showed net income of £58.6m, the same as last year. This gives me confidence that the payments can continue.
Overall, I think it’s a stock that should be considered as part of a broader goal of building income from the stock market.
