So you’ve been saving over the last few years, putting aside cash into your Tax-Free Savings Account (TFSA) again and again. And yet, you really don’t have all that much to show for it. Instead, you’ve been putting cash aside but not investing it. And that’s led you to be no better off than where you started.
Perhaps you’re a nervous investor, or perhaps you haven’t had the time to research. Well, welcome to the Motley Fool! It’s certainly an excellent place to start. Especially if you’re looking for passive income not just from dividends, but also returns.
Getting started
Let’s start with that $40,000. If you want to create over $2,000 in passive income, you’ll want to do so safely. That will mean putting some cash aside into fixed income investments, while also perhaps placing some into higher growth options.
Right now is an excellent time actually when it comes to fixed income. Consider putting even half of that into a guaranteed investment certificate (GIC) for the next year or more. You could lock in a 5% interest rate. That right there would create major passive income. We’ll get to numbers, though, later.
From there, you’ll want exposure to a diverse set of investments such as exchange-traded funds (ETF) and stocks based on your risk tolerance. Again, perhaps $15,000 of that investment I would put into an ETF. Then the rest can be used for stocks. Let’s now go over some options.
A perfect pair
For your ETF investment, you’ll likely want an investment that provides diversification as well as long-term growth. Honestly, many people like to track the S&P 500, and that’s an excellent option! But I feel that with an ETF you should go global.
That’s why I like the Vanguard FTSE Global All-Cap ex-Canada Index ETF (TSX:VXC). This ETF provides you with what it says, global exposure without investing in Canada. Not because Canada is bad, but because you can invest in stocks easily and find more research on those individual stocks here.
The ETF provides a 1.58% dividend yield, with shares already up 8.5% year to date. So you get global exposure and diversification, as well as mitigate your risk against a downturn at home.
Then there are stocks to consider. For steady returns, I would look for top monthly dividends for passive income. A great option these days would be a company such as Northland Power (TSX:NPI). NPI stock focuses on long-term projects in the renewable energy sector. You can therefore look forward to long-term growth, as well as a 5.15% dividend yield.
Putting it together
So now let’s see what investors could earn from all of these investments over the next year. You have a GIC bringing in 5%. You then have VXC ETF, which grew 21% in the last year, and offers a 1.58% dividend yield. Then you have NPI stock which should grow 54% to reach former 52-week highs, with a 5.15% yield. Let’s add it all up then!
| COMPANY | ORIGINAL INVESTMENT | RECENT PRICE | NUMBER OF SHARES | DIVIDEND | TOTAL PAYOUT | FREQUENCY | NEW SHARE PRICE | NEW INVESTMENT TOTAL |
| GIC | $20,000 | N/A | N/A | 5% | N/A | N/A | N/A | $21,000 |
| VXC | $15,000 | $56.50 | 265 | $1.11 | $294.15 | quarterly | $68 | $18,020 |
| NPI | $5,000 | $22.50 | 222 | $1.20 | $266.40 | monthly | $34.85 | $7,736.70 |
All together, here is what you would get from $40,000. You would make returns of $1,000 from the GIC, $3,020 from the ETF, and $2,736.70 from NPI stock. Then, add in $294.15 and $266.40 from dividends. In total, your passive income could come to as much as $7,317.25 in 2024! With at least $1,560.55 guaranteed from the GIC and dividends.
