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I believe it is absolutely possible to create a secondary profit by investing in FTSE stocks.
I will follow some steps to achieve this, which I will explain below.
The easy way
Nobody likes problems, and I am the same, especially when it comes to investing. With that in mind, I'm going to use a simple strategy when it comes to my favorite investing and stock picking.
I'm going to open a stocks and shares ISA. This is due to favorable tax consequences, and a generous £20K annual allowance.
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.
Next, I will buy shares in this ISA that I believe are green chips and industry leaders. In addition, I will diversify my pot of stocks as this is a good way to reduce risk.
Risks to consider
As I invest in equity stocks, I must remember that returns are not guaranteed.
Next, each stock comes with its own risks that may bind performance and returns. I need to consider this in every stock I decide to buy.
Ultimately, I have a cash and profit target in mind. However, if I earn less than my target yield, this will affect how much additional income I can generate.
Quick calculations
If I had £15k left over today, I'd put it all into my ISA with the intention of buying shares. I will follow my plan for 30 years, and aim to earn 8%.
The magic of compounding will help turn my £15k into £462,107 after 30 years. The next step is to put down 6% a year, and break this down into weekly chunks, which equates to £530 a week.
Stock selection
One stock I would buy if I were following this plan would be Legal & General (LSE: LGEN).
I FTSE 100 Financial services have a strong influence on financial planning and retirement products. Along with extensive experience and extensive coverage, the business has a good track record of performance and returns. However, I understand that the past is no guarantee of the future.
What I like about Legal & General's modus operandi is the fact that it works in a growing sector. The demand for retirement and financial planning products is only increasing, in line with the aging population. Furthermore, when consumers invest in such products, they are usually long-term products. This can help Legal & General to operate efficiently with good revenue visibility.
From a bearish perspective, economic turmoil can be a concern for several reasons. First, in tough times, consumers may spend less on non-essential products such as future financial products as they struggle with the cost of living crisis. This can harm performance and payments. In addition, if the economic picture worsens, benefits can be cut. Legal did this during the 2008 financial crash.
Going back to the other side of the coin, the basics of Legal & General look good to me. The cherry on top is the huge dividend yield of 9% currently. In context, this is above my target of 8% as stated above.
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