Wealth-boosting passive income for life by investing as little as $4 a day in ASX shares.
It may sound like a success story overheard at parties.
But anyone can potentially do it.
Here's how.
Put that $4 aside every day
First, you need to be diligent in putting aside your investment allocations for those ASX shares that will deliver reliable passive income.
Transaction fees have come down sharply over the past decade(s). But to keep brokerage fees from eating into your returns, you'll still want to invest in larger allotments.
My online trading account, for example, charges $10 for any transactions up to $1,000.
So, put aside your $4 each day. And then buy promising ASX dividend shares every month or two. $4 a day will see you with approximately $243 to invest every other month or $1,460 each year.
An important boost to achieving lifelong passive income from ASX shares will be taking advantage of the magic of compounding. You can do that by holding onto your stocks and reinvesting any dividends you receive.
For some idea of the sizeable difference that can make over time, the S&P/ASX 200 Index (ASX: XJO) has gained 14% in just over four years (since 3 May 2019).
Over that same period, the S&P/ASX 200 Gross Total Return Index (ASX: XJT) – which includes all cash dividends reinvested on the ex-dividend date – has gained 33%. That's almost two and a half times as much!
Which ASX shares offer historically reliable passive income?
There are a lot of quality ASX shares that offer dividends.
In the hunt for lifelong passive income, as a rule, I'd stick to the bigger companies with lengthy track records of paying two annual dividends each year.
I'd also lean towards stocks paying fully franked dividends. That will enable you to likely hold onto more of that passive income at tax time.
Ideally, you should look at building a portfolio of at least 10 ASX shares operating across different sectors and in different geographic locations. This lowers the risk of your whole portfolio taking a hit if headwinds strike a particular sector.
With that said, investors might want to consider these three ASX 200 dividend shares as a starting point.
Woodside Energy Group Ltd (ASX: WDS) shares trade on a trailing yield of 10.8%, fully franked. The Woodside share price is up 15% over the past 12 months.
Australia and New Zealand Banking Group Ltd (ASX: ANZ) shares trade on a trailing yield of 6.5%, fully franked. The ANZ share price is up 7% over the past 12 months.
JB Hi-Fi Ltd (ASX: JBH) shares trade on a trailing yield of 7.8%, fully franked. The JB Hi-Fi share price is up 15% over the past year.
With just $4 a day, you can begin building a portfolio of ASX dividend shares like these. And by reinvesting those dividends, the power of compounding will help you get to your lifelong passive income goal.
