How I’m building a new second income for 2023

I have been investing in stocks and shares since 1986-87, when I was a fresher in university. Starting with almost nothing, my goal was to turn my small income into a big capital. So, over the past 35 years, my husband and I have been building our stock holdings. But now is the time to think about turning this extra capital into a second income.

Four forms of second income

As a freelancer, the easiest way for me to generate another income is to take on more clients. But the problem with this earning income stopped when I quit my job. Therefore, I prefer passive income – income that I receive without any extra work or effort.

Alternatively, I can deposit a lump sum and collect savings interest from this pot. But even the top savings accounts only pay about 3.5% per year on deposits. And I know some rich people save money.

A third option may be to buy government and corporate bonds. These debt securities pay a fixed rate of interest and then return my capital at maturity. For example, a six-month US Treasury bond pays a fixed rate of 5.13% per year (and is one of the safest investments).

But buying bonds as a retail investor can be awkward and complicated – and some brokers won’t let me do this. But if I were a safety-first investor looking for low-risk products, quality bonds would definitely be on my radar today.

A fourth option is to buy an investment property by putting down a deposit and getting a purchase mortgage. I can then let this house out for rent and get a profit from the net income after expenses. But I really don’t like being an employer, especially after hearing horror stories from my friends in this field.

The #1 choice for lifetime passive income

My favorite route to generate income from capital is to buy dividend paying stocks. But the company’s dividends are not guaranteed, so these cash payments can be cut or canceled at any time. To reduce the risk, I spread the pot across different companies and sectors.

In my opinion, the British elite FTSE 100 The index is packed with quality businesses whose shares are undervalued and also pay decent dividends. So my husband and I have invested heavily in these cheap stocks. As well as dividend income, we aim to achieve long-term capital gains from the sale of shares at a profit.

When I checked Footsie today, I saw a variety of cheap buys in sectors such as asset management and insurance, banking, oil and gas, mining, telecom, and more. In some cases, the dividend yield of these stocks can exceed 7% per year, and at least 20 Footsie stocks pay 5%+ a year in cash.

But is it true that I can double my income by relying solely on blue-chip UK stocks? I believe that the FTSE 100 company is expected to pay £85.8bn in dividends in 2023 alone. wow!

In summary, based on current progress, we expect this new passive income to be up and running in the second half of this year. So watch this space.