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No savings at 40? How I’d build passive income in a Stocks and Shares ISA

first_imgNo savings at 40? How I’d build passive income in a Stocks and Shares ISA I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. TomRodgers has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Amazon and Tesla. The Motley Fool UK has recommended Hargreaves Lansdown and recommends the following options: short January 2022 $1940 calls on Amazon and long January 2022 $1920 calls on Amazon. 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. “This Stock Could Be Like Buying Amazon in 1997” I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! Image source: Getty Images. center_img Simply click below to discover how you can take advantage of this. Our 6 ‘Best Buys Now’ Shares Tom Rodgers | Monday, 9th November, 2020 Passive income should be the goal for every wise investor. And getting a regular income from stocks and shares is simpler than it might seem. The way that the world’s best investors do it is to focus on dividend income. 5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Think of Warren Buffett. He has rigorously applied the same strategy for 60 years and there are some key elements that have remained the same throughout the decades. Following his path could help build passive income for a seriously impressive nest egg.How to start building passive incomeTo begin with I’d open a Stocks and Shares ISA. The tax benefits are immense. In a Stocks and Shares ISA, investors pay no tax on the dividends they receive. This is a crucial point for building passive income.If instead I decide to invest in FTSE 100 or FTSE 250 shares outside of an ISA? The maximum I can receive in dividends every year before paying tax is just £2,000. This is a vast reduction from 2018, when the upper limit was £5,000 per year. So today’s investors are much worse off than those that came before them. Doesn’t seem very fair, does it? Fortunately, as an added benefit, investors pay zero tax in a Stocks and Shares ISA if the value of their shares rises. This is called ‘capital gains’. That means it’s much easier to build passive income by using such an ISA than by ignoring it.  Pound-cost averagingLet’s talk about one of the key rules that Warren Buffett has followed in building a multi-billion-pound empire. He says that passive income is simpler to achieve if you invest the same amount every month. Warren Buffett calls this ‘dollar-cost averaging’. For our purposes as UK investors we can think of this as ‘pound-cost averaging’.  Buffett’s theory has been proven to work over six decades of investing. It says that I will get better results overall if I build positions in shares consistently, both when their prices are a little higher and when they are a little lower. Many UK Stocks and Shares ISAs will actually offer cheaper prices to buy shares if I set up a direct debit for the same amount every month. For example, Hargreaves Lansdown runs one of UK’s most popular Stocks and Shares ISAs. In its version, there is a special feature called ‘Regular Investing’. This condition is only unlocked if I invest every month. Passive income growthWithin this, I could choose to build passive income by investing in popular funds like the FTSE 100-listed Scottish Mortgage Investment Trust that owns stakes in big names Amazon and Tesla. I can also focus on FTSE 100 dividend shares with the largest payouts, like British American Tobacco at 8.3%.With regular investing, the amount I have to pay in a Hargreaves Lansdown Stocks and Shares ISA to buy the shares drops from £11.95 per trade to just £1.50 per trade. That’s a whopping 87% less that I have to pay in fees. Other Stocks and Shares ISA providers are available, of course. Some of the most popular UK ones are AJ Bell and Interactive Investor. When we zoom out and take a big picture investing view, these little things can add up to massive passive income benefits.  Enter Your Email Address See all posts by Tom Rodgerslast_img read more

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