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Wouldn’t it be great to create a permanent source of income without having to put in any effort at all?
Well, the good news is that it is possible and the Australian stock market is a great place to generate passive income.
This is because many ASX shares distribute a portion of their dividends each year in the form of Dividends.
Passive income from the stock market
In light of the above, if I had $20,000 stashed away in Commonwealth Bank of Australia (Australian Stock Exchange: CBA) If I had it in my bank account or under my bed, I would consider investing it in the stock market.
However, while it may be tempting to start reaping the rewards of my investment right away, I believe the smarter move is to let my investment run its course. complex.
After all, if I can grow my $20,000 into something bigger, the potential passive income I’ll generate will be bigger as well.
Nothing is guaranteed in the stock market, but it is widely accepted that a 10% annual return is possible. This is in line with the historical return of the stock market.
With a 10% annual return, my $20,000 would be worth about $135,000 in 20 years. At this point, it might be worth considering turning it into a source of passive income.
If you can build a portfolio of ASX dividend stocks with an average Profit return If I invest $135,000 in a mutual fund, my annual earnings will be $8,100. That’s $675 per month if spread out evenly over the months.
Should I keep doing this longer? Let’s see what happens if I do.
30 year time frame
If I lease my $20,000 boat at 10% per year for 30 years instead of 20 years, it will grow to $350,000.
The passive income on this amount would be much greater. As before, with an average dividend yield of 6%, I would expect to make $21,000 in profits per year.
This equates to a monthly passive income of $1,750, which is more than double what I would have made if I had stopped this process 10 years ago.
It is also worth noting that my investment portfolio will continue to grow, albeit at a slower rate, after I withdraw my dividends each year. This means that my income stream will continue to grow year after year without me having to lift a finger.
Overall, I think this shows how rich you can become when you put your excess capital into the stock market.
