Wouldn't it be nice if you could get a $50,000 paycheck each year without having to lift a finger?
Well, this certainly is possible. You just need to build an investment portfolio that has the potential to provide you with the desired passive income.
But how can we get there? Well, the good news is that if you have time on your side, history shows that growing a portfolio capable of yielding $50,000 a year in passive income is possible.
Generating $50,000 of passive income from ASX shares
Firstly, the Australian share market is home to a good number of ASX shares that provide investors with 5%+ dividend yields.
For example, as we covered here, popular ASX shares such as ANZ Group Holdings Ltd (ASX: ANZ) and Rio Tinto Ltd (ASX: RIO) are currently forecast to provide yields of ~5% in the coming years.
And while we don't know what yields these shares will offer in the long term, you can bet that there will be something similar on offer for income investors when the time comes.
This means that if we have $1 million to invest, we can build an ASX share portfolio that averages a 5% yield in order to receive $50,000 in passive income each year.
And if these companies grow their dividends, our annual passive income will follow suit.
But I don't have a million dollars?
The majority of readers will not have a million dollars to invest in ASX shares when the market reopens. But that doesn't mean that we can't make this a long-term goal.
If you can put $12,000 into ASX shares each year and achieve a return of 10% per annum, you will have reached the $1 million target after 22.5 years.
At that point, you can switch your focus to income and watch the $50,000 roll in each year without lifting a finger.
The key is to build a diverse portfolio filled with high-quality ASX shares and let compounding do its thing. Companies with strong business models, competitive advantages, and positive long-term growth outlooks would be top of my list.
