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Yahoo
3 days ago
- Business
- Yahoo
Here's how an investor could earn £27 of weekly income for life from a £20k Stocks and Shares ISA
As a long-term investor, the investing horizon of a Stocks and Shares ISA appeals to me. Tucking some money away now will hopefully help me to build wealth over the years and decades to come. But it could also let me earn income along the way, thanks to the dividends that some shares pay. Here is how, if an investor had £20,000 available to invest in an ISA now, they could aim to earn £27 on average in dividends each week for the rest of their life. My own approach to a Stocks and Shares ISA typically involves what is known as compounding. That means reinvesting dividends or gains now, to build a large portfolio and hopefully earn even more down the line. But an alternative is possible. An investor could simply invest their ISA in dividend stocks today and start taking out the passive income as it arrives. That means there is not the opportunity for the dividends to compound, as in my portfolio. But it has the advantage that the ISA could start generating dividends in a matter of weeks. This means the investor need not wait for years or even decades to receive them. An obvious first step is to compare the many Stocks and Shares ISAs that are available on the market and make an informed choice about what one seems most suitable. Not all investors are built the same – and neither are all ISAs. Average weekly dividends of £27 would require a £20,000 Stocks and Shares ISA to yield 7% on average. That is over double the current average yield of the FTSE 100 index of leading companies. But I do think it is achievable in the current market, by spreading the money over a diversified collection of blue-chip shares with proven income generation potential. What is important, though, is not to let the tail wag the dog. No dividend is ever guaranteed to last, so buying a share just because it has a high dividend yield now can be a value trap. Instead, an investor ought to look at the likely source of future dividends, for example by considering how a business's free cash flows look set to evolve over time. As an example of one company I think investors should consider for their Stocks and Shares ISA, FTSE 100 asset manager M&G (LSE: MNG) has a policy of aiming to maintain or grow its dividend per share each year. The current yield is well over 8%. I like the company's strong brand, large customer base, and deep experience in the asset management space. One risk that has consistently concerned me of late about the share is the fact that investors were withdrawing more money from the company's core business than they were putting in. That remains a risk to profits in the long term, in my view. However, the past week saw news of a big tie-up with a large Japanese financial services company. I think that could help M&G grow. Meanwhile, it has proven its business has strong cash generation capability – something that can hopefully keep funding the juicy dividend. The post Here's how an investor could earn £27 of weekly income for life from a £20k Stocks and Shares ISA appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended M&g Plc. 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 2025
Yahoo
11-05-2025
- Business
- Yahoo
From £1,000 to £10,000: investing with a Stocks and Shares ISA
For British investors, a Stocks and Shares ISA is one of the most powerful tools for building wealth. While only £20,000 can be added each tax year, any capital gains and dividends received are protected from the fingers of the taxman. So if an investor manages to 10x their portfolio, they get to keep all of these juicy gains. But the question now becomes, how can an investor transform a £1,000 investment into £10,000? Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions. There are different ways to strive for a 10x return. Exploring penny stocks can be a good place to start. These enterprises have a habit of delivering explosive gains (although many also fail). One example would be Tilray Brands in 2018. With hype surrounding the upcoming legalisation of cannabis, the cannabis-themed consumer packaged goods enterprise was a seemingly exciting opportunity for investors to gain exposure to this market. And within a few short months of its IPO, the share price skyrocketed by 1,000%. So anyone who put £1,000 to work in July 2018 quickly had close to £10,000 by mid-September. The problem is that hype-driven returns are rarely sustainable. Anyone who held on to their shares has seen all of these impressive gains wiped out. And those who bought at the peak are now sitting on a 99% loss – ouch! Needless to say, penny stocks are hazardous. And while everyone loves the idea of getting rich quick, that often requires taking on lottery-like levels of risk. Instead of focusing on penny stocks, exploring small-caps might be a more successful approach. There's no denying these businesses still carry high levels of risk. But with established revenue streams and cash flow, they're far more financially robust than most penny stock enterprises. And that makes the investing process significantly less speculative. Not all small-caps are destined for greatness. But over the last decade, there have been multiple sustainable 10x success stories emerging from this space. Alpha Group International (LSE:ALPH) is a perfect example of this. The foreign exchange risk management and alternative banking fintech joined the London Stock Exchange in 2017 at a market-cap of around £64m. It's since carved out a niche that corporate bankers were overlooking. Revenue, earnings, and cash flows have surged at a double-digit rate despite economic slowdowns. The journey hasn't been smooth, with the share price getting chopped in half during the 2020 pandemic. And yet even with this turbulence, shareholders have reaped a total just shy of 1,100% as Alpha grew from an AIM-listed small-cap into a FTSE 250 mid-cap. And it's how it became one of my largest holdings in my Stocks and Shares ISA. Alpha's growth story might not be over. While the company's currently being courted for a potential takeover, management may decide to remain independent. Why? Because despite all the progress, it's barely made a dent in its total addressable market that's still dominated by archaic systems and legacy banks. The company has begun stepping outside its niche, which means more competitive pressures. So assuming it isn't acquired, the journey to deliver another 10x return may take considerably longer than eight years. Nevertheless, for patient investors seeking substantial long-term gains in a Stocks and Shares ISA, Alpha may be worth considering if it doesn't get snapped up in the coming weeks. The post From £1,000 to £10,000: investing with a Stocks and Shares ISA appeared first on The Motley Fool UK. More reading 5 Stocks For Trying To Build Wealth After 50 One Top Growth Stock from the Motley Fool Zaven Boyrazian has positions in Alpha Group International. The Motley Fool UK has recommended Alpha Group International. 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 2025
