Are you keen to build a bullet-proof passive income stream in 2024 without investing a fortune?
Well, the good news is, by investing in the right basket of ASX dividend shares, you don't need to be a billionaire like Warren Buffett to get started.
Though you should keep this Warren Buffet investing nugget in mind.
"Embrace what's boring, think long-term, and ignore the ups-and-downs," the Oracle of Omaha advises.
With that said, here's how I'd aim to build a reliable passive income stream in 2024 with just $7,000.
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Diversify your passive income portfolio
First, it may be tempting to invest my full allotment in a single high-yielding ASX stock.
ASX coal stock Yancoal Australia Ltd (ASX: YAL) comes to mind.
And if I already had a diversified passive income portfolio, Yancoal might be one I'd add to it.
While coal prices have come down from their records, and Yancoal's FY 2024 dividends may not match the soaring payouts we saw in 2022 or 2023, the Yancoal share price has come down 19% over the past year too.
That sees Yancoal trading at a whopping fully franked trailing yield of 19.6%. Meaning even if this year's dividends are significantly reduced, the company is still one I'd consider adding to my broader portfolio of income stocks.
But, as I'm starting with just $7,000, I'd steer clear of selecting my own basket of diversified shares for my bullet-proof passive income stream.
Instead, I'd consider a high-yielding exchange-traded fund (ETF) like the BetaShares Australian Dividend Harvester Fund (ASX: HVST).
By investing $7,000 in this ASX ETF I'll have immediate exposure to a well-diversified portfolio.
HVST holds between 40 to 60 ASX dividend shares, operating across a range of sectors.
Its top three holdings are Commonwealth Bank of Australia (ASX: CBA), BHP Group Ltd (ASX: BHP) and CSL Limited (ASX: CSL).
Just from those first three, my $7,000 passive income portfolio is already diversified across the banking sector, healthcare and mining.
As at 29 December, HSVT's 12-month yield was 6.7%, franked at 80%. The ASX ETF's 12-month grossed-up yield works out to 9.9%.
And I can expect a passive income payout from this investment every month, with HVST making monthly distributions.
Remember Warren Buffett
So, what kind of passive income can I expect in 2024 from my $7,000 investment?
Well, working with the trailing yield, that would be $469. As for the grossed-up yield, that equates to a very tidy $693. And, of course, I'll be hoping for some capital gains as well.
Now, looking back to what Warren Buffett advises, I'll also remember to think long-term and harness the magic of compounding.
HSVT has a dividend reinvestment plan.
If I was able to reinvest that passive income for 20 years, at the current 6.7% yield (and assuming no capital gains or losses for the BetaShares Australian Dividend Harvester Fund), that would see my $7,000 investment balloon to $26,634 in 20 years.
And in 30 years, that would grow to $51,952.
