Here's how I'd invest £200 per month to make passive income for life – Motley Fool UK

We’d all love to retire with some extra passive income in our pockets. My approach is to invest regularly, over the long term.
Image source: Getty Images.
There are plenty of passive income ideas out there. Some are rather fanciful, though. And others require constant effort to some degree. For me, the way to generate passive income is through investing in shares on the UK stock market.
And that involves very little effort. I’d start by transferring £200 per month into a Stocks and Shares ISA. Then every time I’d accumulated £1,000, I’d invest it in a stock purchase.
That’s it, then, with no further effort needed on that investment. Just leave it there for decades, until I want to retire.
Am I making it sound too easy? Well, maybe. After all, when we have the cash for an investment, we still have to figure out what to actually buy.
And there’s a bewildering number of individual shares out there that we could go for. There are literally thousands of stocks and shares that can be bought in an ISA.
But I have a quick and easy way of narrowing it down to a small handful of possibilities. I’d go for just two categories of shares — UK investment trusts and UK dividend shares.
My first instalments would go into investment trusts. These are pooled investments, and the money is spread across a range of investments with a stated strategy.
That means I get some instant diversification and don’t have to worry about individual stocks going bad. But which investment trusts?
I’d start with the list of Dividend Heroes put together by the Association of Investment Companies (AIC). That lists all those that have raised their dividends for at least 20 years in a row — and some have achieved that for more than 50 years. To me, that suggests they carry less risk.
The AIC helpfully lists their strategies. So I could start with a trust that seeks income from UK shares, like City of London. Then maybe I’d go for a global one next, like Bankers or Alliance Trust. And so on.
Once I have a few investment trusts tucked away, I’d start looking for individual dividend shares. Individual companies are riskier, but I’d try to offset that risk by selecting ones from different sectors.
Again, I’d use a useful resource for narrowing down the choice. AJ Bell publishes its Dividend Dashboard every quarter, which examines the biggest forecast yields in the FTSE 100.
Some are very high, but they’re regularly cut. So picking from those with no cuts in the past decade, I might go for British American Tobacco. Then perhaps consumer goods manufacturer Unilever. After that, maybe pharmaceuticals giant AstraZeneca. Or National Grid, which is a long-term dividend provider.
There are always individual risks, and none of these dividends is at all guaranteed. We’ve even seen spells when UK shares have performed poorly.
But if I’m investing for decades, the long-term evidence convinces me that UK shares should win out. And with my diversified approach to seeking passive income, I only need to make one investing decision every five months. And then do no more work.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
Alan Oscroft has positions in City of London Inv Trust. The Motley Fool UK has recommended British American Tobacco and Unilever. 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.
| Stephen Wright
When I’m looking for stocks to buy, big dividends can be attractive. On my radar right now is a FTSE…
Read more »
| Royston Wild
Buying shares with above-average dividend yields can have a spectacular effect on long-term passive income. Here are two high-dividend stocks…
Read more »
| Jabran Khan
This Fool delves deeper into a penny stock that could be primed to grow and provide lucrative returns in the…
Read more »
| Jon Smith
Jon Smith shares some of his takeaways after seeing the Q2 reported loss for Warren Buffett’s company, Berkshire Hathaway.
Read more »
| Alan Oscroft
After what seems like years of going nowhere, the Aviva share price is finally showing signs of life. I take…
Read more »
| Jabran Khan
Jabran Khan is hunting for the best shares to buy. This commodities business offers an enticing dividend yield to boost…
Read more »
| Royston Wild
Rio Tinto offers one of the biggest dividend yields on the FTSE 100 today. But does this make it a…
Read more »
| Suraj Radhakrishnan
Lithium has quickly become the most in-demand metal in 2022. I am looking at two UK shares in the EV…
Read more »
View All
Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.
To make the world Smarter, Happier, And Richer
Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show and premium investing services.
Read more about us >

We have taken reasonable steps to ensure that any information provided by The Motley Fool Ltd, is accurate at the time of publishing. Any opinions expressed are the opinions of the authors only. The content provided has not taken into account the particular circumstances of any specific individual or group of individuals and does not constitute personal advice or a personal recommendation. No content should be relied upon as constituting personal advice or a personal recommendation, when making your decisions. If you require any personal advice or recommendations, please speak to an independent qualified financial adviser. No liability is accepted by the author, The Motley Fool Ltd or Richdale Brokers and Financial Services Ltd for any loss or detriment experienced by any individual from any decision, whether consequent to, or in any way related to the content provided by The Motley Fool Ltd; the provision of which is an unregulated activity.
The value of stocks, shares and any dividend income may fall as well as rise and is not guaranteed, so you may get back less than you invested. You should not invest any money you cannot afford to lose, and you should not rely on any dividend income to meet your living expenses. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, administrative costs, withholding taxes and different accounting and reporting standards. They may have other tax implications, and may not provide the same, or any, regulatory protection. Exchange rate charges may adversely affect the value of shares in sterling terms, and you could lose money in sterling even if the stock price rises in the currency of origin. Any performance statistics that do not adjust for exchange rate changes are likely to result in an inaccurate portrayal of real returns for sterling-based investors.
Fool and The Motley Fool are trading names of The Motley Fool Ltd. The Motley Fool Ltd is an appointed representative of Richdale Brokers & Financial Services Ltd who are authorised and regulated by the Financial Conduct Authority (FRN: 422737). In this capacity we are permitted to act as a credit-broker, not a lender, for consumer credit products. We may also publish information, opinion and commentary about consumer credit products, loans, mortgages, insurance, savings and investment products and services, including those of our affiliate partners. We do not provide personal advice and we will not arrange any products on your behalf. Should you require personal advice, you should speak to an independent, qualified financial adviser.
The Motley Fool Ltd. Registered Office: 5 New Street Square, London EC4A 3TW. | Registered in England & Wales. Company No: 3736872. VAT Number: 188035783.
© 1998 – 2022 The Motley Fool. All rights reserved. The Motley Fool, Fool, and the Fool logo are registered trademarks of The Motley Fool Holdings Inc.


Leave a Comment