At a time when job security has decreased, many people are looking for new ways of boosting their income. Some look to getting a second job, but this can take away a substantial amount of free time. In my opinion, one of the best ways I can achieve it is via FTSE 100 stock investments. Getting income from stocks can be achieved in several different ways, and can make a difference with less than £100 a week. So how’s this possible?
Types of income
One of the most popular ways of generating income from stocks is via dividend payouts. When I buy a stock, I’m entitled to a share of any money that’s paid out to the owners. If I own 1,000 shares and a dividend of 10p per share is announced, I’d get £100. This income is ‘passive’ in nature, as I don’t have to do anything particularly active in terms of trading stocks to get this money.
You can also see the income gained from dividend payouts by comparing the dividend yield to a Cash ISA. Companies such as Vodafone and GlaxoSmithKline currently have yields in excess of 5.5%. By comparison, a Cash ISA will struggle to offer higher than 1%.
Another way of generating income from stocks is from taking profits. I recently wrote a piece that ran through how a £1,000 investment in some stocks would now be worth over £10,000. The point here is that you can actually use some of this profit as income. From your initial investment, you can always partially sell out of some shares. From the full amount you can take out 10%-20% as profit, but still be left with 80%-90% of the investment.
The caveat with this type of income booster from stocks is that it isn’t passive. You need to pick your investments carefully, and take profit when you think it’s the right time.
Investing less than £100 a week
Even with £96 a week you can boost your income. Over the course of the year, this adds up to around £5,000. Let’s say we split this amount evenly into dividend stocks and growth stocks. The dividend-paying stocks help to boost our income straight away via regular payouts. And at the end of year one, compounded growth should enable 10% profit to be taken out of the growth stocks.
Assuming a dividend yield of 5%, and a 10% growth rate, the £96 a week quickly starts to add up. The £5,000 pot at the end of the first year should be able to generate £250 income in year two, with £500 available to be trimmed as profit from the other growth stocks. Now that the £96 regular investing has been established, the numbers are likely only going to increase as more time passes.
Overall, generating income from FTSE 100 stocks doesn’t have to be a difficult task. I can pick good companies with high dividend yields to supplement high-growth stocks that I believe will perform well into the future.
The post 2 ways I’m planning on boosting my income from FTSE 100 stocks with £96 a week appeared first on The Motley Fool UK.
jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2020