Wouldn't it be nice to have $10,000 of passive income arriving in your bank account each year without having to lift a finger?
Well, the good news is that the share market is the place to do this.
All you need is time, some capital, a pinch of patience, and an eye for an investment.
Making $10,000 of passive income from ASX shares
I'm going to focus on starting at zero in this article. If you already have money to invest, you're going to be ahead of the curve already, which is always good.
It's not hard to find 5% dividend yields on the Australian share market. Even Telstra Group Ltd (ASX: TLS) currently trades with a yield close to this level right now.
So, to get $10,000 of passive income from a portfolio averaging a 5% dividend yield, you would require a $200,000 balance.
That sure is a lot when starting at zero, but don't let that stop you from embarking on this journey.
That's because with patience and compounding, it is possible to grow your investment portfolio to this size in time.
Compounding
Nobody knows what the share market will do tomorrow, next week, the month after, or next year.
But what we do know is that historically it rises over time. In fact, it has just recently hit a record high.
Not all years will be as successful as 2024 has been, but history shows that the share market tends to balance things out. As a result, it has delivered an average return of approximately 10% per annum over the past 30 years.
There's no guarantee that it will do the same in the future, but I believe it is fair to assume that it does for the purpose of our calculations. So that's what we'll be doing.
If I were able to invest $230 a week into ASX shares, which equates to $1,000 a month, I could grow a portfolio to $200,000 sooner than you might think if I can achieve a return of 10% per annum.
In fact, it would take just 10 years of this to get to my target destination if I reinvested my dividends.
Switching focus
Once I have grown my portfolio to the $200,000 mark, I can change my focus to passive income and start cashing out my dividends each year.
As I mentioned at the top, by averaging a 5% dividend yield across this portfolio, I would pull in $10,000 of income each year.
It may take time and patience, but it sure will be worth it in the end.
