How Much to Invest for $2,000 in Monthly Passive Income (2024)

Christopher Liew, CFA

·3 min read

How Much to Invest for $2,000 in Monthly Passive Income (1)

Written by Christopher Liew, CFA at The Motley Fool Canada

People invest for capital appreciation and to build retirement wealth, although others want to generate regular passive income streams. Earning $2,000 in monthly passive income sounds unbelievable but is achievable through dividend investing. However, the investment amount required to produce the desired income is considerable.

To make $2,000 in dividend income, the investment amount and rate of return must be $400,000 and 6%, respectively. If the rate is lower, say 4%, the upfront investment is $600,000.

High-yield TransAlta Renewables (TSX:RNW) pays monthly dividends on the TSX. Given the stock price ($11) and yield (8.19%), you only need to buy $293,040 worth of shares to arrive at $2,000 per month. Assuming your available funds is $41,350, and the stock price and yield remain constant, it will take 24 years to hit the objective.

Green investment

TransAlta Renewables generates contracted cash flows from long-term power purchase agreements. The $3 billion company has owned assets in Canada (wind, hydro, and gas) and economic interests in Australia (gas) and the United States (wind and solar).

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In Canada, TransAlta Renewables is one of the largest wind power generators. The aggregate or combined gross installed capacity (owned assets and economic interests) is 2,993 MW. In 2022, revenue increased 19.1% to $560 million, although net earnings fell 47.1% year over year to $74 million.

Wind power is TransAlta’s largest renewable fleet, although volume is strongest in the first and fourth quarters. In the second and third quarters, hydro delivers a higher volume. Fortunately, net earnings in Q1 2023 rose 9.7% to $45 million versus Q1 2022, notwithstanding the underperformance of the Canadian wind fleet due to lower-than-normal wind conditions.

Its President, Todd Stack, said, “We remain on track to meet our 2023 guidance largely due to the performance of our diversified operating portfolio.” The Adjusted EBITDA target this year is between $495 million and $535 million compared to $487 million, while free cash flow could reach a high of $380 million versus $347 million last year.

Clean energy expansion

TransAlta plans to expand its existing assets to realize incremental growth in a competitive environment. The early-stage development projects in the three countries would add 685 MW after completion from 2025 to 2028.

Despite the effect of seasonal variations on business results, long-term contracts with strong counterparties should provide stable cash flow and consistent shareholder returns. Thus far, since the IPO, TransAlta has never missed paying a monthly dividend since September 13, 2013.

TransAlta believes that 2020 is a decade of massive clean energy expansion. The company is ready to invest in clean energy solutions and excited about its role in the transition.

Spread the risks

TransAlta Renewables attracts income investors because of its juicy dividends and consistent dividend history. However, building a dividend income portfolio instead of a single-stock investment is safer. You spread the risks through diversification or investing in a mix of companies.

Dividend investing ensures protection against price declines or fluctuations. Also, the power of compounding is at play when you reinvest the dividends. You can start small and add more shares as you go along. Money growth is slow, but you’d accomplish your objective of earning $2,000 in monthly passive income over time.

The post How Much to Invest for $2,000 in Monthly Passive Income appeared first on The Motley Fool Canada.

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Fool contributor Christopher Liew has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

2023

How Much to Invest for $2,000 in Monthly Passive Income (2024)

FAQs

How much do I need to invest to make $2000 a month? ›

Earning $2,000 in monthly passive income sounds unbelievable but is achievable through dividend investing. However, the investment amount required to produce the desired income is considerable. To make $2,000 in dividend income, the investment amount and rate of return must be $400,000 and 6%, respectively.

How to make $2000 a month passive income? ›

Wrapping up ways to make $2,000/month in passive income
  1. Try out affiliate marketing.
  2. Sell an online course.
  3. Monetize a blog with Google Adsense.
  4. Become an influencer.
  5. Write and sell e-books.
  6. Freelance on websites like Upwork.
  7. Start an e-commerce store.
  8. Get paid to complete surveys.

How much do I need to invest to have passive income? ›

To develop a meaningful passive income stream from financial assets like cash-equivalents, stocks, and bonds, you'll need a decent account balance. With $100,000, an investment paying a 5% dividend or interest payment provides $5,000 per year cash flow.

How to make $2500 a month in passive income? ›

Invest in Dividend Stocks

One of the easiest passive income strategies is dividend investing. By purchasing stocks that pay regular dividends, you can earn $2,500 per month in dividend income. Here's a realistic example: Invest $300,000 into a diversified portfolio of dividend stocks.

Is $2000 a month enough to live on? ›

Retiring on $2,000 per month is very possible,” said Gary Knode, president at Safe Harbor Financial. “In my practice, I've seen it work. The key is reducing expenses and eliminating any market risk that could impact your savings if there were a major market downturn.

How much do I need to invest to make $1000 a month? ›

A stock portfolio focused on dividends can generate $1,000 per month or more in perpetual passive income, Mircea Iosif wrote on Medium. “For example, at a 4% dividend yield, you would need a portfolio worth $300,000.

How to make $1,000 a month passive income? ›

Passive Income: 7 Ways To Make an Extra $1,000 a Month
  1. Buy US Treasuries. U.S. Treasuries are still paying attractive yields on short-term investments. ...
  2. Rent Out Your Yard. ...
  3. Rent Out Your Car. ...
  4. Rental Real Estate. ...
  5. Publish an E-Book. ...
  6. Become an Affiliate. ...
  7. Sell an Online Course. ...
  8. Bottom Line.
Apr 18, 2024

Can 2 people live on $2,000 a month? ›

According to one source, a couple with two kids managed to live on $2,000 per month by spending $750 on mortgage, $350 on food, $100 on car insurance and gas each, $100 on utilities, $450 on health insurance and $20 on entertainment.

How can I make $100 a day passive income? ›

Some popular passive income strategies include investing in dividend-paying stocks, creating an online course, or writing an eBook. These methods require an initial investment of time and effort but can generate a daily return of $100 or more if executed correctly.

Where to invest $1,000 for passive income? ›

Investing in companies that pay dividends can enable anyone to start collecting passive income. The average stock currently yields around 1.4% (as measured by the S&P 500's dividend yield). That implies that a $1,000 investment in the average dividend stock would produce about $14 in annual dividend income.

What is the best investment to get monthly income? ›

Investing Rs. 5,000 per month opens up several options for generating monthly income. Consider allocating this amount across dividend-paying stocks, real estate investment trusts (REITs), or bond funds, which can provide regular returns.

What passive income is not taxed? ›

By keeping assets in tax-deferred accounts like IRAs and 401(k) plans, you won't have to pay tax on your income and gains until you withdraw the money from the account. In the case of a Roth IRA, you may never have to pay tax on your distributions at all.

What is the simplest way to make passive income? ›

29 passive income ideas
  1. Start a dropshipping store.
  2. Create a print-on-demand store.
  3. Sell digital products.
  4. Teach online courses.
  5. Become a blogger.
  6. Sell handmade goods.
  7. Run an affiliate marketing business.
  8. Sell stock photos online.
Mar 20, 2024

What is the best second source of income? ›

25 passive income ideas for building wealth
  • Create a course. One popular strategy for passive income is creating an audio or video course, then kicking back while cash rolls in from the sale of your product. ...
  • Write an e-book. ...
  • Flip retail products. ...
  • Sell photography online. ...
  • Dividend stocks. ...
  • Rent out a parking space.
Mar 27, 2024

How much can I make if I invest $100 a month? ›

Investing $100 per month, with an average return rate of 10%, will yield $200,000 after 30 years. Due to compound interest, your investment will yield $535,000 after 40 years. These numbers can grow exponentially with an extra $100. If you make a monthly investment of $200, your 30-year yield will be close to $400,000.

How much will I have if I invest $500 a month for 10 years? ›

What happens when you invest $500 a month
Rate of return10 years30 years
4%$72,000$336,500
6%$79,000$474,300
8%$86,900$679,700
10%$95,600$987,000
Nov 15, 2023

How much to invest to make $500 a month? ›

Some experts recommend withdrawing 4% each year from your retirement accounts. To generate $500 a month, you might need to build your investments to $150,000. Taking out 4% each year would amount to $6,000, which comes to $500 a month.

How much money do I need to invest to make $3000 a month? ›

Imagine you wish to amass $3000 monthly from your investments, amounting to $36,000 annually. If you park your funds in a savings account offering a 2% annual interest rate, you'd need to inject roughly $1.8 million into the account.

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