Is it really possible to build a passive income stream via the ASX to boost my standard of living for as little as $3 a day?
While it might sound like pie-in-the-sky thinking, you may be surprised by what a little determination and patience can deliver in the stock markets.
Here's how I'd go about creating an ASX passive income stream in 2025 on just $3 a day.
Tapping ASX dividend stocks for passive income
First, I'll need to be diligent in putting aside $3 every day to invest in high-quality ASX dividend stocks.
Now, I won't be buying shares every day or even every week. That would see brokerage fees eat away far too much of my savings before they can begin to deliver reliable passive income payments.
Instead, I'll put that $3 safely away throughout next year. By the end of 2025, I will have $1,096 to invest.
Then, I'll need to decide which ASX dividend stocks to invest in.
My preference is for larger, established blue-chip S&P/ASX 200 Index (ASX: XJO) companies that pay fully franked dividends.
I prefer the larger end of the market, as these stocks tend to be less volatile than their smaller counterparts. The passive income they pay tends to be more reliable over time.
For example, consider companies like BHP Group Ltd (ASX: BHP), Woodside Energy Group Ltd (ASX: WDS), Woolworths Group Ltd (ASX: WOW), and Commonwealth Bank of Australia (ASX: CBA).
The golden rule of diversification
In addition to their strong dividend payout histories, the four ASX 200 stocks I just named operate in very different markets.
That's important.
By investing in a diverse range of ASX shares over time (and at $3 a day, my passive income plan extends beyond 2025), I'll lower the risk that my entire portfolio will take a big hit if any single company or sector comes under pressure.
Also important are those franking credits. That's something you won't get from US-listed stocks or many other global exchanges.
By investing in ASX 200 dividend stocks with franking credits, I should be able to hold onto more of that standard of wealth-improving passive income when it's time to pay the ATO its yearly take.
Now, I hope to not only see those dividends rolling in on a regular basis, but I also hope to see the companies' share prices rise.
If I can target the right ASX dividend stocks, I think I can comfortably beat the five-year 49.3% gains delivered by the S&P/ASX 200 Gross Total Return Index (ASX: XJT), which includes all cash dividends reinvested on the ex-dividend date.
That return works out to an 8.4% gain on an annualised basis.
I think I can achieve at least 10.0% a year, though, which will see me earning $110 in passive income after the first year.
And by keeping at my $3 a day in savings beyond 2025 and reinvesting those dividends in the early years, I'll see that income stream grow to where it can greatly improve my standard of living in due time.
