Do you have $50,000 to invest?
Firstly, congratulations!
That's a lot of money that would have required discipline to save.
You are ahead of many other Australians already, with a National Australia Bank Ltd (ASX: NAB) study this year showing the average savings balance is around $34,500.
But rather than instantly blowing all your hard-earned $50,000 on a flashy car and booze, would you like to turn it into an ongoing productive asset?
How about receiving $30,000 of passive income each year for the rest of your life?
If that sounds like something you'd like to achieve, let's examine how it could be done:
Let's grow the nest egg
As great as $50,000 is, it's not yet big enough to harvest $30,000 of income per year.
So the initial step is to grow the $50,000 into a larger nest egg.
There are many ETFs and ASX shares that can help you achieve this. In reality, it's prudent to diversify across several stocks — but as a simple example, here we'll use audio networking technology provider Audinate Group Ltd (ASX: AD8).
Past performance is never a surefire indicator of what will happen in the future.
But for the purposes of our calculations, consider this. Audinate shares have climbed 118.8% over the past five years, even through a couple of major downturns like the 2020 COVID-19 market crash and the 2022 tech correction.
That equates to an annual return of 16.19%.
According to the government's MoneySmart calculator, $50,000 worth of Audinate shares could grow to a handsome $293,247 after just 11 years.
Furthermore, if you maintain your saving discipline that built up the initial $50,000, you could fast-track this phase.
Let's say you buy an additional $80 of Audinate shares each week. That could take you to $296,150 after just nine years.
Great work. Now we're cooking with gas.
…then make an omelette with the nest egg
The second step is to convert this nest egg over to an investment that will pay you income.
Due to favourable taxation laws, the ASX is blessed with many dividend shares.
For our hypothetical, I will use the listed investment company WAM Capital Limited (ASX: WAM).
WAM Capital is favoured by many retirees because those who run the fund always ensure a decent amount of dividends are paid out, regardless of what the market is doing.
Even if that means selling off some of its holdings, so be it. Their philosophy is to return capital to investors regularly.
This is all to say that it's currently paying out a fantastic dividend yield of 10.16% fully franked.
Now, let's take the $296,150 you made in the first stage and buy WAM Capital shares.
That will now provide you with a passive income of $30,088 each year. That's even before franking provides you further benefits.
Mission accomplished!
