How I’d invest £100 per month in the stock market for lifelong passive income

Investing in the stock market can be risky. But it can also bring great rewards for patient and careful investors.

Instead of keeping the money in a savings account, I bought shares in the business. Instead of receiving interest, I am looking for a return from the company’s profits.

return

At the moment, the best savings account you can find pays 3% interest per year. The rate is variable, so it can go up or down, but it’s there now.

If I invest £100 a month at 3% annual interest, I will have £58,519 after 30 years. Clearly, I have made money, but I believe I can do better in the stock market.

Over the last decade, the FTSE 100 has averaged returns of just over 7% per year. That’s more than I can get on my current account right now.

Investing £100 a month with an annual return of 7% will result in an investment worth £117,750. But the real difference comes in the income each will generate.

In terms of passive income, a 3% savings account will return £1,708 per year after 30 years. A 7% portfolio would pay £7,660.

Investing in the stock market offers better returns than savings accounts for long-term investors. But I can do better by looking at individual stocks.

Stocks to buy

Rising interest rates have weighed on stock prices over the past year or so. But that means there are some good investment opportunities for me right now.

Share on Halma, for example, has fallen by around 19% in the last 12 months. A share of the company’s earnings would be worth £21 today, compared to £26 a year ago.

Later, Halma’s business increased. Over the past year, the company’s revenue increased by 15% and earnings per share increased by 20%.

Outside of the FTSE 100, there are other UK stocks that I find attractive at the moment. diploma is another stock I bought for my portfolio.

Diploma’s share price is only down 3% compared to last year. But the latest trading update shows that business is fundamentally sound.

At FTSE 250 the company grew revenue by 30% and earnings per share increased by 26%. I’m the impressive one.

My investment plan

Savings, index investing, and buying stocks are all ways I can see to generate passive income. And I can start one of them right now.

I believe there are some great opportunities in the stock market at the moment. That’s why I want to invest money there.

Investing in business should – I think – allow me to build wealth more effectively. And with 30 years to invest, small differences can add up.

I will look to keep some money in savings for emergencies. But for building passive income, the type of returns that the stock market offers is more attractive to me.