£20,000 in an ISA? Here's how I would aim for a second tax-free income of £22,684 a year

Every month I invest in shares in my ISA to build my portfolio. The goal is to generate a significant secondary income for the future so that I don't have to put in extra hours in the virtual environment to earn extra money.

Here, I'll explain how I can go from investing £20k to £22k+ tax-free income.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Learning the ropes

History has shown that the stock market rises over time. So, the earlier I start investing, the better. This gives my portfolio more time to compound and build wealth.

Although this is true, I also think it might be wise not to rush and buy the first group of stocks that I like. Instead, I took my time to grasp the basics of investing.

That will include learning about different sectors, and familiarizing yourself with individual companies, their latest financial reports, and how they actually make money. I can also start learning how to value stocks.

Fortunately, there is a wealth of information online these days, including resources and/or stock picking resources The Motley Fool. YouTube and podcasts are also great for gathering information.

For me, though, you can't beat a good old book. Here are some of my recommendations for investing and investors.

• 100 Baggers: Stocks That Return 100-to-1 and How to Find Them by Christopher Mayer
• The Psychology of Money by Morgan Housel
• The Snowball: Warren Buffett and the Business of Life by Alice Schroeder
• The Art of Quality Investing: How to Invest in the World's Best Companies by combining Quality and Luc Kroeze

Building my portfolio

Next, I will decide what to buy with the £20k in my ISA. There is no guaranteed growth or dividends, so I would like to buy about 8-10 stocks for diversification purposes.

One of those stocks would be Polar Capital Technology Trust Company (LSE:PCT). This is a FTSE 250 an investment trust that invests in growth stocks, listed in the US.

Investing in this will give my portfolio immediate exposure to some of the largest technology companies in the world, incl an apple, Microsoftand the chip maker Nvidia. These are incredibly profitable businesses with entrenched competitive advantages.

Many of these companies are at the center of the artificial intelligence (AI) revolution. According to various experts, AI could contribute billions of dollars to the global economy by 2040. So I would like my ISA to have some exposure to that, just in case. The Polar Capital Technology Trust is a direct way to achieve this.

The risk with this stock is that it only focuses on the technology sector. If that turns out to be unpopular with investors, which happens from time to time, I would expect the trust's performance to suffer.

I already have a lot of technical exposure in my portfolio. But if I were starting over, this would be my choice.

Generating income

For such stocks, I think it's perfectly reasonable to aim for a 10% return over time.

If I could achieve this, my portfolio would double after 7.2 years. After 30 years, it will grow to a staggering £348,988 (excluding trading and platform fees).

At this point, I can deduct 5% per annum for a taxable income of £17,449.

Otherwise, I would turn to high yield stocks. If they collectively pay 6.5%, that would result in an annual income of £22,684.