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ISA stocks and stocks can significantly increase the chances of investors building wealth for retirement. Protected from capital gains and dividend taxes, you’ll total tens of thousands of pounds over time, but ultimately you’ll earn an impressive passive income.
The exact amount you need to invest for a decent secondary income depends on what they invest. FTSE 100 and S&P 500 Stocks, I am optimistic that investors will be able to enjoy passive income of £2,000 by the time they leave.
Let me show you why.
Please note that tax procedures depend on each client’s individual circumstances and may change in the future. The content in this article is for informational purposes only. It is not a form of tax advice or constitutes. Readers are responsible for carrying out their own due diligence and obtaining professional advice before making investment decisions.
Buy UK and US stocks
Diversification is an important part of long-term investment, enabling individuals to broaden risk and realize a spectrum of growth and income opportunities. By allowing around 600 companies to choose, a strategy focused on FTSE 100 and S&P 500 stocks will help individuals achieve this effectively.
The massive weight of the S&P 500’s growth share can drive strong capital gains over time as the stock price responds to rising profits. The UK Blue Chip Index is also packed with dividend stocks that provide reliable, sound passive income (currently the forward dividend yield is around 3.5%). In my view, it’s a powerful combination.
Strong return
An early investment journey begins – therefore more time can grow wealth – better. However, previous long-term returns (shown below) of UK and US stocks suggest that large nest eggs can be built even if they are late to the party.
| index | Average annual return (February 2015 – February 2025) |
|---|---|
| FTSE 100 | 6.3% |
| S&P 500 | 12.4% |
The 40-year-old is retiring at the state pension age of 68 and is about to earn a passive income of £2,000 a month. During that time, if you invest less than £250 equally into the S&P (£246 to be exact). This is based on a long-term average revenue of 9.4% across both indexes.
There are several ways to use this to generate income, including buying pensions and reducing the fund’s share each year. Another common option is to buy dividend stocks. This will throw away cash while offering more growth potential.
If middle-aged investors choose a 6% dividend stock, they will meet that magical £2k monthly income target.
FTSE 100 Heroes
To build the £400,000 portfolio needed for such passive income, they can invest in individual stocks, tracker funds, mutual funds, or a mixture of all three.
One share I think is worth seriously considering Legal & General (LSE:LGEN). This could provide important capital gains and dividends over time. As a leading life insurance, wealth services and retirement product provider, there are multiple ways to leverage the growing older people around the world. And, due to the growing uncertainty about the future of state profits, financial planning is becoming more important, which means you will earn profits.
You may struggle to increase your profits during the economic downturn, but that extraordinary cash generation means at least ongoing legal and general stocks (which currently bring about a huge 9%) to provide at least solid dividend income. Payments here have risen in 12 of the last 13 years.