Stock market

How much income can I get from investing £90 a week in shares?

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Taking a second job is a way to earn a second income. But it is not the only one.

I can try to make more money by investing in carefully selected blue chip shares. Unlike working a second job, this won’t mean more hours per week.

Below I explain how I will do this in practice – and what size of second income I can expect to earn.

Financial success is based on financial reality.

The desire to earn a second income is often driven by a need or desire for more money. This may mean that there is not much spare cash to put into the stock market.

So my starting point would be an honest assessment of whether I realistically felt I could invest in the shares. Everyone has their own answer. In this example, I use £90 per week.

The reason I mention regularity is because I think habit formation is important when trying to create a second income.

I could just put the spare cash aside and when I had some – but would I actually do that? I think having a regular savings goal helps with my discipline.

Getting ready for investment.

However, the cash sitting on the sideboard is not ready to be put into the stock market.

So I would set up a share dealing account or stocks and shares ISA.

I will also study the stock market and try to learn how to be a good investor.

Finding Shares to Buy

My next step will be to list the shares to buy.

Note that I’m talking about multiple shares here, not just one. There’s a simple reason why I wouldn’t put all my money into my single best investment idea – it could turn out worse than I hoped!

To illustrate the type of share I would look for, consider B&M (LSE: BME).

A discount retailer has a large potential customer market to target. Demand for items such as basic household items and groceries is likely to remain strong. On the one hand, it is a crowded market. This is a threat to B&M’s profit margins. International shipping rates are also high, as it imports a lot of goods from overseas.

But it has what I see as competitive advantages: a highly skilled sourcing operation, strong brand, and large existing customer base. The company announced full-year results this week that showed continued revenue growth in each of its business divisions.

If I had spare cash to invest, B&M is the kind of piece I’d be happy to put in my shopping cart.

Calculating income

With a dividend yield of 3%, though, B&M will earn me just £3 a year for every £100 spent on its shares, if the dividend is maintained at its current level. I would like more!

My £90 a week adds up to £4,680 a year. At a higher average yield – say 6% – this should give me a second income of around £281 a year.

If I had continued, after five years I would have saved over £23,400 to invest. At a 6% yield, this could give me a second income of over £1,400 per year.

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