Asked on 03 Mar 2020
How much capital is needed to start generating $100/month and which investment vehicle to do so? (Considering time horizon is 3 years and not from SSB)
A reasonable dividend yield is 4%. Hence, to generate $1200/yr you will be looking at $30K in capital. This can be done by investing $10K a year over 3 years.
You'll have access to a variety of instruments that can achieve this 4%, it could be REITs, equities or even Unit Trusts (actually, most will achieve more than 4% yield). They each have pros and cons so you will want to understand their chacteristics before you start (this part can be an essay, so I won't elaborate too much). Do note that Unit Trusts can pay dividends monthly, which no other instrument can.
Why 4%? Well, I prefer to be conservative. Dividend payouts can and have been cut before in bad times, so if you invest $30000 expecting 5% and get 4% in the end, it won't feel too painful.
A fast and relative easy way will be to DIY your own REITS portfolio, you can easily get 5% dividend on this. That will cost around $24,000 of capital. If you are lazy or not sure which reits to pick, can consider the REITS ETF to start with and adjust from there.
You can consider dividend investing. Assuming an average of 5% dividend returns per year. You will need around $24,000 to invest in dividend stocks.
But do not pick any stocks that simply pay dividends. Please do your own due diligence and analyze those the stocks to ensure that they are fundamentally strong and would continue to pay dividends in the long term. Some types of stocks to consider are blue chips and REITs.
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03 Mar 2020