$10,000 a year in passive income buying just $10k worth of ASX shares? Here's how I'd go about it

To earn $10,000 a year in passive income from a $10,000 investment in ASX shares, you'd need to be getting a 100% dividend yield.

And if you know any ASX companies offering a reliable 100% yield, well, drop us a line.

But that doesn't mean you can't get to that $10,000 annual passive income stream from your ASX share investment.

It will just take some patience and time.

Tapping into the magic of compounding for long-term passive income

When you're buying ASX shares, it's worth taking some advice from legendary investor Warren Buffett.

And when it comes to long-term investing, Buffett famously said, "I don't invest to make a quick profit. I buy stocks with the mindset that the market might shut down tomorrow and stay closed for five years."

Or, more succinctly, Warren Buffett once quipped, "Our favourite holding period is forever."

Now, rest assured, you won't have to wait forever to see your $10,000 investment in ASX shares deliver $10,000 a year in passive income.

I believe you can reasonably expect to earn a long-term yield of at least 5.2% from quality ASX dividend stocks.

S&P/ASX 200 Index (ASX: XJO) energy giant Woodside Energy Group Ltd (ASX: WDS) shares, for example, trade on a 5.1% fully-franked dividend yield.

Shares in Aussie freight operator Aurizon Holdings Ltd (ASX: AZJ) trade on a 6.2% dividend yield, 90% franked.

And ASX 200 bank stock Westpac Banking Corp (ASX: WBC) trades on a 4.4% fully-franked dividend yield.

Using these three as our sample, if you bought an equal amount in each stock, you could expect to earn a 5.2% dividend yield.

To the maths!

So, in the first year after your initial $10,000 investment, you could expect to earn $520 in passive income.

To achieve your $10,000 in annual passive income at a 5.2% yield, you'll need to own $192,308 in ASX dividend shares.

Bearing Warren Buffett's advice in mind, we'll be patient and tap into the magic of compounding.

Let's take the S&P/ASX 200 Gross Total Return Index (ASX: XJT) – which includes all cash dividends reinvested on the ex-dividend date – as our benchmark for the types of returns you might expect from that initial investment.

Over the last five years, the ASX 200 total return index has gained 46%. That equates to an annualised return of approximately 7.9%.

Now we won't try to beat those returns. But we certainly hope to match them.

So, if you sit tight and leave that $10,000 invested for 38 years, you should have $199,287.

At a 5.2% yield, that will give you an annual passive income of $10,363.