Using stocks to earn a second income is a popular way to fund a more luxurious retirement lifestyle. But it’s no secret that when following the 4% withdrawal rule, investment portfolios need to be worth a considerable sum to provide a meaningful income stream of, say, £30,000. Fortunately, building a chunky nest egg is relatively straightforward, thanks to compounding returns.
And for those fortunate enough to already have £50,000 saved up, the timeline isn’t as long as many might think. Aiming for a £30k second income At 4% a year, a £30k annual income stream would require the underlying investment portfolio to be worth £750,000. That’s obviously not pocket change.
But it’s also relatively easy to acquire when combining prudent financial decision-making with patience. Let’s start with one of the most popular investing methods – index funds. Since its inception, the ’s delivered an average annualised return of around 8%.
And while the has typically offered closer to 11%, it’s also been more volatile. Let’s assume an investor wants to stick with a more conservative strategy. With £50,000 to invest at an 8% return, how long would it take to reach £750,000? The answer’s around 34 years.
Fortunately, a huge chunk of time can be eliminated by simply topping up the portfolio each month. And with just an extra £500 each month, the journey can be shortened by a decade. But what if we wanted to speed things up even further? Taking on more risk If investors .
