The Australian share market is a great place to generate a passive income.
And while it may take time to generate life-changing sums of money from ASX shares, that doesn't mean you can't generate income from smaller investments.
Furthermore, if you have time on your side and are willing to be patient, there is potential to transform small investments into something very significant in the future.
Generating passive income
If you look hard enough, you will find some quality ASX shares trading at attractive levels and offering very big yields.
For example, youth fashion retailer Universal Store Holdings Ltd (ASX: UNI) is currently fetching $3.34.
Last week, the team at Bell Potter initiated coverage on the company with a buy rating and a $4.60 price target. This implies a potential upside of 38% for investors over the next 12 months.
Importantly for passive income seekers, the broker is also expecting fully franked dividends per share of 20.8 cents in FY 2024 and 26.3 cents in FY 2025. This equates to 6.2% and 7.9% yields, respectively.
If Bell Potter is on the money with its recommendation, then a $500 investment would yield $31 of passive income in year one and $40 in year two. In addition, your original investment would grow to be worth $690 if it climbed to Bell Potter's price target.
So, certainly a handy little earner on a relatively modest investment.
Playing the long game
If you're willing to be patient, then making consistent investments in quality ASX shares could be very lucrative.
For example, if you were to invest $500 into ASX shares every month for the next 10 years and earned a 9.6% return (the 30-year average), you would end up with a $100,000 portfolio.
At that point, generating 6.2% and 7.9% dividend yields on your investment portfolio would lead to passive income of $6,200 and $7,900.
