I started investing late in life, but I’ve still managed to develop thousands of pounds in passive income.
And I think it’s easier than most people believe. Like a lot of readers, I also started with next to nothing.
No savings, no investments and no trust fund. No business interests, and no property. No buy-to-let rental income either.
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I had the money I made from freelance writing.
But without passive income, I had no safety net to simply enjoy my leisure time.
So this is how I started.
Zero to hero
Depositing small, regular amounts into a tax-advantaged account like a Stocks and Shares ISA or SIPP is a great way to get up and running.
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.
It soon grows into a decent stake without you really noticing. Today I’m 42 years old and I have about £4,000 of passive income banked.
Almost exactly half of this comes from share price increases in the growth stocks I own.
The rest is from regular dividend payments from income stocks.
Not all companies pay dividends. These include the biggest names: Amazon, Netflix and the Google owner Alphabet.
Thirst for growth
It can be frustrating to find a stock you like, and see it doesn’t pay dividends. However, it’s not always a binary choice between dividends or growth forever.
For example: one of my best investments did not pay a dividend when I first bought the shares.
However, it will start sending me free dividend cash this year.
This is the £200m market cap viral medicine testing company Hvivo (LSE:HVO).
It trades on the AIM market, one step below the FTSE 250.
Buying shares in what was then an unknown 12p-per-share penny stock was quite scary. But I did a huge amount of research before buying in.
I listened to investor presentations. I looked at their rival companies to see how fast they could grow. I watched like a hawk to see if management actually made good on promises.
Hot profit
Hvivo’s sales shot up from £3.3m in 2019 to £55.5m in 2023.
From losing £5m a year, the company is now raking in £8m a year in profits.
It is vastly more cost-effective for big pharma companies to use Hvivo’s models than any other method. That’s why Hvivo’s pay-up-front clinic model has seen such explosive growth.
So I’ll hold this alongside my other dividend-paying shares.
I’ll use compound growth to my advantage here: reinvesting any dividend payments into buying more shares. For me, that includes 7.5% dividend renewables fund Greencoat UK Wind and the low-cost 13.8% dividend yield metals producer Sylvania Platinum.
Building passive income is a way I’ve used to make my money work for me, rather than the other way around. Given my results to date, I can’t see myself stopping any time soon.
