How much do you need in an ISA to target a £3,253 monthly second income?
Building a second income stream is a great idea for 2026 and there are lots of ways to do it. Starting a business is one way, buying a property to rent out is another.
The downside to both of these, though, is that they involve a lot of work. But there are ways of aiming for a second income without a second job.
The stock market
Instead of starting a business, one way to earn extra income is by investing in someone elseâs. There are lots of ways to do this, but the easiest is through the stock market.
A lot of people think of the stock market as a place to buy shares with a view to selling them at higher prices. And while that does happen a lot, itâs not the only thing it can be used for.
Buying shares isnât just about betting on a share price â itâs a way of becoming a business owner. And it has two big advantages over setting one up yourself.
One is that size brings certain advantages. Another is that you have to do a lot less work compared to building your own operation from scratch.
No money? No problem!
A lot of people think you can only invest in stocks if you have a lot of money. But this isnât strictly true â you can start buying shares in companies with as little as £1.
Making £3,253 a month (what the Office for National Statistics says is the median UK salary) does take a big investment. But you can definitely start small and aim to reach that level.
Ultimately, youâll need a portfolio worth somewhere around £546,504. But by investing £600 a month and achieving an 8.5% annual return, itâs possible to get there within 25 years.
Is 8.5% an achievable average? Itâs what the FTSE 100 has returned over the last 10 years, but the challenge is to work out which stocks might offer that return going forward.
Investment ideas
For investors focused on income, stocks like Primary Health Properties (LSE:PHP) might be worth considering. The stock comes with a 7.25% dividend yield, which is very high.
The company owns and leases a portfolio of GP surgeries, mostly to the NHS. That means its rent collection metrics are some of the most reliable in the industry, which is very positive.
Itâs always worth thinking about the risks in this kind of situation. And with Primary Health Properties, a change in UK healthcare policy could impact a huge amount of its income.
The firmâs average tenancy agreement, though, has another decade until it expires. So I expect investors who buy the stock today to get a lot of their money back even if things do go wrong.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.
Stash it in an ISA?
Earning a £3,253 monthly income might take time. But for anyone who can get there by investing regularly using a Stocks and Shares ISA, thereâs a big benefit.
Income tax and National Insurance bring a workerâs take-home pay down from £3,253 to £2,700 a month. But dividends from an ISA are exempt from dividends.
That makes earning £3,253 from investing very different to getting it as a salary. So even if it takes time, I think itâs a worthwhile ambition.
The post How much do you need in an ISA to target a £3,253 monthly second income? appeared first on The Motley Fool UK.
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More reading
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- £5,000 to invest? 5 income stocks with 20+ years of growth to consider
- How much do you need in a FTSE 250 dividend portfolio to make £14.2k of annual income?
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- Revealed! 3 of my favourite FTSE 100 income stocks right now
Stephen Wright has no position in any of the shares mentioned. The Motley Fool UK has recommended Primary Health Properties 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.
