Why the FTSE 100 is my number one choice for passive income

So, the UK stock market fell again. It can drive long-term passive income seekers away from stocks. But I think it’s wrong, and I want to explain why.

At times like these, a Cash ISA may seem like a better bet. Some offer around 4% interest now, at least for one-year fixed terms. That is guaranteed and safe.

But such returns could not last as Bank of England interest rates fell again.

The FTSE is down

At FTSE 100 stuck, and investors lost money last week. If we get into any further trouble, we can be thrown out, right? And they won’t make much money in retirement.

But it’s all about time scale and diversification. If we get it right, I think we will reduce the risk of loss. And we will improve the possibility of generating a solid passive income.

ISA millionaire

Investing in Stocks and Shares ISAs has now made more than 2,000 millionaires in the UK. And I’ll tell you what most of us do now Footsie is dipped.

I think they are buying new stock that they can now.

What stocks do ISA millionaires hold? That is easy to answer.

According to the ISA provider, he bought shares Aviva, National Grid, shell, GSK… Top buys are in FTSE 100 stocks with growth and dividend records.

Top ISA is back

OK, so I’m not a millionaire. Most of us don’t. But we can still benefit from the Stocks and Shares ISA returns. Over the past 10 years, the average return is 9.6%.

Anyone with £10,000 could earn £960 a year in passive income at that rate. And if we can build an investment pot of £50,000, we can put out £4,800 a year.

Now, I don’t expect to get that rate every year. The arrival of Covid led to a 13% loss in 2019-20. And that can happen again. In fact, some years of losses are almost certain.

Realistic targets

But I think a target of around 7% is achievable. And it is generally in line with the long-term average of the UK stock market.

That means £50,000 in a Stocks and Shares ISA could deliver £3,500 a year. I would definitely like to have someone come along to supplement my pension when I retire.

And now, I’m looking at some top income stocks that are cheap. Forecast M&G yields up to 8.5%. Barratt’s Development is at a yield of 8%. And in Rio Tintowe’re looking at 7.1% yield.

Shares are cheap

All of the FTSE 100’s top performers are better today as share prices fall.

Buying the stocks I mentioned here will create a diversified selection as well. That way, if one of the sectors falls, we will have protection.

Over the short term, dividends may decline. But I think this is the best way for passive income. Buy FTSE 100 shares from different sectors, and hold them for the long term.