How to Build a Bulletproof Monthly Passive Income Portfolio in 2024 With Just $20,000

Investing in various asset classes such as GICs and monthly dividend ETFs can help you create a passive income stream at a low cost.

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Creating multiple passive income streams can help you accelerate your financial goals. Historically, individuals and households have invested in real estate to generate passive income. However, the steep rise in home prices in the last two decades has meant real estate investing now requires a sizeable amount of debt. In addition to rising interest rates, homeowners will also have to account for vacancy periods, maintenance, and taxes, which lower their yield significantly. Here are two other ways you can build a bulletproof monthly passive income portfolio in 2024 with just $20,000.

Invest in GICs

A GIC, or guaranteed income certificate, is an investment that lets you earn interest on your principal amount for a certain time period. These interest payments can be paid monthly, quarterly, semi-annually, or annually while the principal amount will be returned to you at maturity.

So, investors should note that GICs have a lock-in period that may range from a few months to several years, and withdrawing money before maturity could result in penalties.

The interest rate hikes since 2022 have made fixed-income instruments attractive. For instance, Buffett has close to US$160 billion invested in U.S. Treasury Bills, a short-term instrument backed by the country’s treasury with a maturity of less than 12 months. Currently, T-bills pay an interest rate of between 5% and 6% on maturity.

Basically, fixed-income products such as GICs are less risky compared to equities and provide you with an opportunity to earn a passive income stream at a low cost. Investors below the age of 30 can consider allocating roughly 25% of their savings toward GICs, and this number can be higher for older investors.

Invest in monthly dividend ETFs

Another low-cost investment option for earning a passive income stream is dividend stocks that offer a tasty dividend yield. Investors should identify a portfolio of dividend-paying companies that generate cash flows across market cycles, allowing them to maintain their payout in good times and bad.

As analyzing quality stocks requires time and expertise, investors can consider holding dividend ETFs (exchange-traded funds) that have a monthly payout. One such TSX ETF is the iShares Global Monthly Dividend Index ETF (TSX:CYH).

The CYH ETF offers you exposure to a diversified portfolio of global dividend stocks. Moreover, the index screens companies based on criteria such as company size, dividend growth, and payout ratios. It is also hedged to the Canadian dollar, sheltering you from fluctuations in foreign exchange rates.

The top holdings of the ETF include giants such as Altria Group, Verizon, Exxon Mobil, Pfizer, and Philip Morris, which account for 11% of the fund. The financial sector accounts for 23% of the ETF, followed by utilities at 20%, consumer staples at 10.2%, and energy at 10%.

With more than $140 million in total assets under management, CYH holds over 300 stocks in its portfolio and offers you a dividend yield of 4.4%. These payouts have risen by 40% in the past decade.

Young investors can allocate around 75% towards stocks or equity ETFs, as this asset class has consistently outpaced inflation over time.

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 Aditya Raghunath has no position in any of the stocks mentioned. The Motley Fool recommends Pfizer and Philip Morris International. The Motley Fool has a disclosure policy.

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