How I’d invest £185 a month in UK shares to make a £10,000 passive income for life

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Wouldn’t it be nice to make some passive income to replace earnings at some point in the future? I’d say so. That’s why I’m creating a plan of action to make it happen.

There are a few factors to think about, but overall, it involves investing in UK shares.

Shares can be an excellent way to invest, in my opinion. History suggests the same. For instance, the long-term annual return for UK shares is around 8%.

Bear in mind that the actual return every year can vary considerably and can sometimes even be negative. As an example, FTSE 100 returns for 2019, 2020, and 2021 were 17%, -12%, and 18% respectively.

Reaching a £10k passive income

So how should I go about trying to achieve a £10,000 passive income? First, I’d calculate how much and for how long I’d need to invest.

I calculate that I’d need to build a pot that totals £250,000. That might sound like a lot, but regular and diligent saving should achieve this goal over time.

To minimize the monthly investment that I’d need to save, I’d look to start as early as possible. If I don’t need to start withdrawing a passive income for 30 years, I should be able to invest as little as £185 a month.

That said, be aware that if I want to start using my passive income in 20 years instead, I’d need to invest over £450 a month to reach my goal.

Which UK shares?

Next, I’d need to think about which UK shares to buy. One of the simplest options would be to buy a low-cost FTSE 100 index tracker.

Alternatively, I could try to beat the market and buy shares that I think will perform better over time. With some research, I might be able to achieve more than the 8% average return.

For instance, the top three shares in the Footsie over the past decade are JD Sports, Ashtead, and Ocado. On average, they achieved share price returns of 33% per year. If I can consistently find winners like these, I’d be able to start withdrawing passive income much earlier.

How to withdraw income

Once I’ve built a £250k pot, I’d need to think about how best to withdraw a regular income. For that, I’d consider investing in dividend shares. These high-yielding investments are less likely to grow fast but more likely to provide regular and reliable income.

The FTSE 100 includes many high-quality dividend shares. Currently, I’d say the best ones include Rio Tinto, Persimmon, Imperial Brands, Phoenix Group, and SSE. Between them, they should provide more than enough dividend income to allow me to withdraw £10,000 every year and possibly much more.

Bear in mind that dividends aren’t guaranteed and can rise and fall. But by diversifying across several companies and industries, I’d aim to spread my risk.

Overall, I reckon I’d be able to find several reliable dividend earners that can provide me with regular dividend income.

The post How I’d invest £185 a month in UK shares to make a £10,000 passive income for life appeared first on The Motley Fool UK.

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Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands and Ocado Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.