Passive Income: How Much Should You Invest to Earn $1,000 Every Month?

Are you looking to earn $1,000/month in passive income but don’t know how much to invest and where? Then, this article is for you.

| More on:
Hour glass and calendar concept for time slipping away for important appointment date, schedule and deadline

Image source: Getty Images

The way investment math works, time overpowers the amount. The longer you stay invested, the higher the returns you can get. Once you have your financial goal, you can work out various permutations and combinations around how much to invest and for how long. These factors are in your control, and you can change them depending on the potential return on investments, which you can’t control. Here, we will work out some combinations to earn $1,000/month in passive income. 

The best source to earn passive income

One of the best sources of passive income is dividend stocks. Within dividend stocks, you have REITs that pay monthly distributions and bank, energy, utility, and telecom stocks that mostly pay quarterly dividends. Among the dividend kings that have sustained their payouts for decades, the highest yield is 6%.

Some stocks offer a 3–5% yield, and some offer an 8–10% yield. But the problem with high-yield stocks is they are not sustainable over the long term. Many companies slash the payouts in a weak economy. Assuming your passive income portfolio can earn an average dividend yield of 6%, we will prepare an investment plan. 

How much money should you invest to earn $1,000 in monthly passive income? 

The amount you need to invest = Amount you want to earn annually/rate of return x 100.

Dividend YieldInvestment needed
4%$300,000
6%$200,000
8%$150,000
The amount you need to invest to earn $1,000/month in passive income 

Unless you are retiring, a $200,000 investment seems unachievable. You would instead put that money into buying a house, removing mortgage payments from your monthly expense. It is not wise to invest such a huge amount in one go in a volatile stock market. 

If you spend time in the market, investing a small amount every month for 13 years can build you a $210,000 portfolio for an investment of $147,000. Here’s how. 

Start by investing $500/month and then increase your TFSA contribution by 10% annually ($550/month next year and $605/month the year after). Also, reinvest your dividend income to buy more stocks with a 6% yield. 

YearInvestment6% Dividend YieldTotal Amount
2023$6,000 $6,000
2024$6,600$396.0$12,996
2025$7,260$779.8$21,035.76
2026$7,986$1,262.1$30,283.91
2027$8,785$1,817.0$40,885.54
2028$9,663$2,453.1$53,001.73
2029$10,629$3,180.1$66,811.20
2030$11,692$4,008.7$82,512.18
2031$12,862$4,950.7$100,324.44
2032$14,148$6,019.5$120,491.59
2033$15,562$7,229.5$143,283.54
2034$17,119$8,597.0$168,999.26
2035$18,831$10,140.0$197,969.78
2036 $11,878.2$209,847.97
2037 $12,590.9 
How to earn $1,000/month in passive income with a 6% yield 

After 13 years, your invested amount could be around $147,000, your portfolio around $210,000, and your passive income around $1,000/month. 

How to earn $1,000 every month? 

Now that the basic investment plan is in place, your target is to lock in more than a 6% dividend yield. Ensure you divide your $6,000 in at least three dividend stocks from different sectors to reduce risk. 

Now is a good time to buy TC Energy (TSX:TRP) stock while it trades closer to its 52-week low of $50 and lock-in a 6.6% dividend yield. You can invest $500 or $2,000 right now as the pipeline stock could see upward momentum from here. 

The stock has nosedived 15% since November 2022 as investors reacted to an oil leak at the Keystone pipeline and the rising cost of the Coastal GasLink pipeline. The company took a hit on its 2022 profit for these projects and is now on track to return to normal profits. 

The management expects to keep growing its dividend by 3–5% annually as new pipeline projects start earning toll money. 

You can consider investing in Bank of Nova Scotia and True North Commercial REIT as well. They offer a yield of 6.1% and 10.92%, respectively. While the bank stock can grow its dividend in the long term, the REIT might cut its distribution further if the property bubble bursts. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Puja Tayal has no position in any of the stocks mentioned. The Motley Fool recommends Bank of Nova Scotia. The Motley Fool has a disclosure policy.

More on Dividend Stocks

Businessman holding tablet and showing a growing virtual hologram of statistics, graph and chart with arrow up on dark background. Stock market. Business growth, planning and strategy concept
Dividend Stocks

TFSA Magic: Earn Enormous Passive Income That the CRA Can’t Touch

If you're seeking out passive income, with zero taxes involved, then get on board with a TFSA and this portfolio…

Read more »

Man with no money. Businessman holding empty wallet
Dividend Stocks

2 Stocks Under $50 New Investors Can Confidently Buy

There are some great stocks under $50 that every investor needs to know about. Here’s a look at two great…

Read more »

think thought consider
Dividend Stocks

Down 10.88%: Is ATD Stock a Good Buy After Earnings?

Alimentation Couche-Tard (TSX:ATD) stock might not be the easy buy-case it once was. Here’s a look at what happened.

Read more »

money cash dividends
Dividend Stocks

TFSA Dividend Stocks: Earn $1,200/Year Tax-Free

Canadian stocks like Fortis are a must-have in your portfolio to earn tax-free yields for decades.

Read more »

sale discount best price
Dividend Stocks

1 Dividend Stock Down 11 Percent to Buy Right Now

Do you want a great dividend stock down 11% that can provide years of growth potential? Here's one heavily discounted…

Read more »

Growth from coins
Dividend Stocks

1 Grade A Dividend Stock Down 11% to Buy and Hold Forever 

If you're looking for the right dividend stock at the right price, you're going to want to consider this insurance…

Read more »

Target. Stand out from the crowd
Dividend Stocks

2 Dividend Stocks to Double Up on Right Now

Are you looking for dividend stocks to buy right now? Here are two top picks!

Read more »

edit Taxes CRA
Dividend Stocks

Tax Time: How to Keep More of Your Money

Nearly everyone hates paying taxes, although Canadians can lessen the financial pain with the right tax strategies.

Read more »