Is it easy to generate $1000 monthly income through Investment?
For the past few years, with increasing number of lay offs, retrenchments or voluntary resignations happening around due to AI, increased work stress or for whatever reason, this has been a topic that you may encounter when your financial consultant meets up with you and recommends you to build an investment portfolio that generates passive income for you. Normally the gauge amount would be $1,000 monthly, which is $12,000 annually. This could be your retirement portfolio or additional income that helps you cushion part of the expenses, in the event you are not able to work.
I have heard from ex colleague lamenting that he could not survive on just few hundreds or $1,000 monthly. So that they have no choice, but to stick on their day jobs to provide that survival and stability ( Having a job is not as stable as it used to be) .
I agree to an certain extent depending on the situation of the individual. If the person, is married with commitments such as young children and loans to pay, then that amount is certainly insufficient. If the person is single, with no commitments, then perhaps this amount is sufficient and should cover significant part of the necessary expenses.
However, while speaking with this colleague, coming from the same financial services industry and he was much more experienced in years, it dawned upon me another question:" Did he not build an investment for that additional income during these years?" Of course, this question stayed in my heart.
Let's come back to the topic to answer why would i think in this way.
Is it easy to generate $1,000 monthly passive income? The short answer is No.
People may think it's easy. (Even some people in the industry does that, lamenting $1,000 monthly passive income is not enough) The fact is : Do they have the excess funds to generate that income first?
Let's do some calculation :
Generating $1,000 monthly income will be $12,000 per year. Based on a 4% yield. You will need an Investment fund amount of $300,000. ($12,000 / 0.04 (4%) ).
5% yield = $240,000
6% yield = $200,000
Higher yield, Lower investment amount needed. However that will also meant higher overall portfolio risk, when higher yield instruments are introduced to the portfolio.
Hence, how many regular folks out in the streets have that excess funds of $200,000 - $300,000 to build that income generating portfolio? The answer, not a lot .
Is it easy? No.
Is it doable? Yes, and it takes time. Unless you have that amount right off the bat.
These "passive" income are not passive, as it requires funds, time to accumulate, and is subjected to market risks.
It is never easy.
