Investing in stocks and shares is, I believe, one of the best ways to generate a passive income. Indeed, it’s possible to start investing in shares with just £50 a month. Other strategies to generate a passive income require tens of thousands, or even hundreds of thousands, of pounds upfront investment.
Investors also have lots on offer when it comes to choice. For example, I can choose to own a portfolio of income funds, or single stocks in different sectors.
And with that in mind, here are several passive income ideas I think would be great ways to invest £100 a week.
Passive income ideas
I believe the renewable energy industry is one of the most exciting areas of the market right now. There are a couple of businesses in the sector I’d buy to generate a passive income.
The first is the Gore Street Energy Storage Fund. This is unlike any other business on the market. The company buys and builds facilities to help the electricity grid manage renewable energy supply and demand. Some of the profits are reinvested back into the business, with the remainder returned to investors. At the time of writing, the stock supports a dividend yield of 6%.
A company following a similar strategy is Greencoat Wind. However, rather than investing in energy storage facilities, this business buys and builds wind farms. It currently offers a dividend yield of 5%.
Both of these stocks are changing hands for around £1 each. That means investors can buy these passive income investments with just a few pounds.
Of course, they aren’t risk-free. As the renewable energy industry grows, companies are throwing money at new projects. This suggests Gore Street and Greencoat will see lower returns on their assets going forward if they have to pay higher prices.
This could have a knock-on effect on profit margins and cash returns to investors. Still, as a way to generate a passive income and invest in the renewable sector at the same time, I’d buy these stocks.
Funds for income
An alternative way to generate passive income is to invest in income funds and investment trusts. I believe this allows me to access the best of both worlds. I can own funds managed by some of the City’s best fund managers, which control a diversified portfolio of income stocks, as well as picking my own favourite income plays.
There are a couple of funds I’d buy to generate a passive income. The City of London investment trust currently offers a dividend yield of 5%. Meanwhile, the Murray Income Trust yields 4%. Both of these trusts own a diverse portfolio of income stocks, which removes the need for me to pick individual investments.
The downside of these trusts is investors have no control over the companies they own, and management fees can be high. These two trusts charge 0.4% and 0.6% in annual management fees respectively.
These downsides aside, I’d buy both stocks for my passive income portfolio today.