I like the thought of incomes a second earnings on prime of my major job, however can’t spend an excessive amount of time on it. Fortunately, I’ve discovered a means of producing it with valuable little effort, by investing in dividend-paying FTSE 100 shares.

There’s some effort required. It takes a little bit of time to set up a Shares and Shares ISA, however after that I can make investments up to £20,000 a 12 months freed from tax, and buying and selling solely takes seconds.

Please notice that tax therapy will depend on the person circumstances of every consumer and could also be topic to vary in future. The content material on this article is supplied for info functions solely. It’s not supposed to be, neither does it represent, any type of tax recommendation. Readers are answerable for finishing up their very own due diligence and for acquiring skilled recommendation earlier than making any funding choices.

If I wished to do absolutely the minimal, I’d merely shove my cash right into a low-cost alternate traded fund (ETF) such because the iShares Core FTSE 100 UCITS ETF. Shopping for particular person shares is extra enjoyable, although, and selecting them doesn’t really feel like working in any respect.

Enjoyable with FTSE 100 earnings

As soon as I’ve purchased them, the dividends and any share price progress roll into my account, whereas I get on with different issues.

If I had £10,000 at my disposal at present and didn’t maintain any shares, I’d unfold my threat. I’d do that by splitting the money evenly between 5 blue-chips with a stable observe document of paying dividends and providing share price progress too.

One FTSE 100 inventory I’d love to purchase proper now’s insurer Aviva (LSE: AV). It’s a longtime UK firm, reasonably than a shoot-the-lights-out progress inventory. But the shares are nonetheless up 25.32% previously 12 months.

The actual attraction is the dividend. The inventory has a trailing dividend yield of 6.92%, which lifts the whole 12-month return to 32.24%. But Aviva appears good worth buying and selling at simply 12.68 instances earnings.

Inventory efficiency is cyclical. Good years can observe unhealthy, and vice versa. The Aviva share price was stagnating earlier than the latest surge. It may stagnate once more. On condition that I’m investing over a 25-year time period, I’m pleased to take the ups with the downs.

Earnings alternative

Issues are going properly at present. First-quarter normal insurance coverage premiums jumped 16% 12 months on 12 months to £2.7bn, whereas safety and well being gross sales rose 5% as extra Britons took out non-public medical insurance coverage to bypass NHS ready lists. Its wealth arm is on the up, with web flows up 15% to £2.7bn.

Non-public annuity gross sales have climbed as a consequence of at present’s greater rates of interest, however that would reverse as soon as central bankers begin slicing.

Whereas I wouldn’t put all my £10k into Aviva, let’s use that 6.92% yield as a benchmark. It will pay me a passive earnings of £692 in 12 months one. If I reinvested all my dividends, I’d have £53,269 after 25 years. Any share price progress is on prime of that, so I may finish up with much more. Then again, dividends may very well be lower. The shares may fall. That’s investing for you.

Let’s say I additionally invested £500 a month over that 25-year interval. In that case I’d finish up with £454,394, assuming the identical 6.92% return. After I’d begin drawing my dividends I’d get a second earnings of £31,444 a 12 months. Which works out as £2,620 a month.

Clearly, returns aren’t assured and all this takes time. Nevertheless it takes surprisingly little effort for the big earnings I can probably get in return.