No savings? I’d use these methods to build passive income that could serve me a lifetime!

Smart young brown businesswoman working from home on a laptop

Building streams of passive income with no savings may seem unrealistic. However, it’s more than doable.

If I had to do it today, here are the methods I’d use.

Invest consistently

With no savings, I don’t have a lump sum of cash to kickstart my investing journey. Therefore, putting money aside and investing it on a consistent basis is the most important step I could take.

By doing this, I would be able to benefit from compounding. And while it may be easy for financial plans to be derailed, by selecting a realistic amount I could set aside every month to invest, this would allow me to see gains in the long run.

Target quality stocks

The next step I’d take would be to target quality stocks. And I think placing focus on the FTSE 100 is a great place to start.

The UK-leading index is home to an array of blue-chip companies offering high dividend yields. The average yield for the index sits above 3%, trumping that of the S&P 500 and highlighting the potential for some juicy returns. This year alone, the UK index is expected to return north of £80bn to shareholders.

On top of this, I’d also diversify my portfolio, as this is one of the most effective ways to reduce risk. The FTSE 100 has companies offering meaty yields across different sectors such as finance, insurance, housebuilding, and tobacco. By investing across these, I’d reduce my reliance on one industry or company.

Playing the long game

So, I’ve targeted high-yielding stocks that I’m going to invest in on a consistent basis, but what next?

Well, the key to building a source of passive income that will serve me is realising that creating wealth isn’t an overnight process.

More often than not the market has proven that adopting a long-term approach is the best way to reap its rewards. And by doing so, any short-term volatility is ironed out. We’ve most certainly experienced large market volatility in the last few years. And in these times, I may feel inclined to sell when I see the value of my investments dwindling.

However, by viewing them over a timeframe of 10 years minimum, I can ignore short-term volatility in favour of long-term growth.

Be alert

The final method I’d adopt is staying alert. Famous investor Warren Buffett once advised us to “be greedy when others are fearful”. And this means when opportunities arise in the stock market to buy quality companies for a cutdown price, I must be ready to act.

For example, I not long ago opened a position in Barclays following its poor performance in recent times. And being able to pounce on chances such as this is a great way to generate extra wealth.

Risk and reward

Of course, there are risks involved with these methods. Namely, dividends can be reduced or cut at any time by a business.

However, by adopting the techniques above, I’m confident I’d be able to build solid streams of passive income starting from scratch that would serve me in the years ahead.

The post No savings? I’d use these methods to build passive income that could serve me a lifetime! appeared first on The Motley Fool UK.

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Charlie Keough has positions in Barclays Plc. The Motley Fool UK has recommended Barclays Plc. 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.