Short answer:
- Is investing in Stocks and Shares a side hustle? Yes it is probably the best way to ensure passive income – although it requires you to invest money as well as time
- The secret: Investing for the long run, making the most of the Tax advantages of ISAs and SIPPs, and the magic of compound interest.
- What do I know? Well, I’ve got a bit of experience investing in an ISA and a SIPP using Freetrade. And here’s a really handy free share offer if you sign up (full details in the article below):
Full article:
Beyond the Side Hustle Hype: Building Passive Income Through Stocks
Now, you may say this is not a side hustle because it costs money to do it. It’s just a form of saving. That’s true, but a side hustle in stocks and shares is probably the most reliable way of earning passive income that’s possible right now. And what better way to use any income you generate from a side hustle, than to generate more passive income? A side hustle on your side hustle.
Ditch the Get-Rich-Quick Schemes: Research & Understanding are Key
You need to be careful not to fall for a lot of the rubbish online that is focused on ‘secret recipes’, amazing unknown formulas etc, etc. The reality of share trading is you are investing in businesses that you think you’re going to do well and show a return in the future. That requires research, understanding, a bit of time and effort, and a lot of common sense.
Learning from Experience: My Cautionary Tale (and £1.53 Lesson)
I’m not a financial advisor and this blog constitutes in no way financial advice. I’m offering an opinion based on my experience only. You choose to take any action as a result of reading this; it’s entirely at your own risk and I take no responsibility for you losing or making money. As you often see quoted around the place: the value of Investments can go up and down. And I have lost money on Investments where I fell for the bravado about this being ‘the next big thing’. One example was a company that generates electricity from rubbish. I read a very interesting article about them and was persuaded this was going to be big. Fortunately, I only invested about £100 in them, which when they devalued their shares was worth about £1.53… in total. Not per share. Not a great return.
Despite that fairly hefty caveat, it is a good way of bringing in cash and earning money without doing anything at all.
The “Warren Buffett” Approach: Long-Term & Solid Bets
I think the secret here is following the likes of Warren Buffett who invest for the long-term. They buy shares that they think of as a solid bet. These are solid companies with solid balance sheets a good prospects for the future. And then they hold the shares over the long term. They ignore short-term bounces up and down because of external forces, recessions, etc. Actually recessions and downturns are a really good time to invest. Shares drop and you can bang what’s probably a bargain.
Investment Strategies: Dividend Darlings: Steady Growth and Income Streams
The other really good thing to invest in are dividend shares which may not grow in value as fast as the sexier tech stocks and other things that are spouted about on the internet. Good companies invest wisely, do well, and pay their shareholders a dividend as a result.
Tax-Free Savings: Unveiling the ISA Advantage
With a side hustle in stocks and shares, you need to be aware of taxes. Yawn I know. But paying unnecessary tax is daft. If you are going to buy shares, do it the tax-free way. And there’s no better way than to invest in stocks and shares than in an ISA. Stocks and Shares ISAs allow you to buy stocks, shares, and bonds and hold them in an account. If and when the value of the shares goes up or you get paid dividends, you pay absolutely zero tax on them.
Supercharge Your Future: SIPPs, Tax Breaks, and Compound Interest
The other brilliant thing to do is put money in a SIPP. Which is a self-invested pension plan. The huge benefit of this is that the taxman contributes towards your investment if you are a taxpayer. If you are a basic rate taxpayer and you put 100 pounds in a SIPP, then HMRC will add 25 pounds to your sip. Yep, the government ends up buying your shares. How cool is that? And if you’re a higher rate taxpayer you still get the 25% added to your sip and you can claim the remaining 15% back as cash at the end of the year in your tax return.
This makes it in my view the most brilliant place to put income from side hustles. Now income from side hustles like any other income is taxable and needs to be declared to the government. There’s been a lot of publicity recently about how HMRC are going after side hustlers who don’t declare their tax. Those that keep it quiet because they think they can get away with it not being declared. But guess what? Banks and big tech companies are now obliged to tell the government. So there is no point in hiding it. It’s quite a serious thing, tax avoidance.
But if you put your (declared) side hustle earnings into a pension the government will pay back the tax that you paid in so you might not see the cash for a while, but it’ll secure your future. And with the amazing benefits of compound interest, you’ll have a nest egg that grows.
If you don’t know about compound interest it’s a brilliant thing. You put money somewhere, it earns interest (or shares pay you dividends and you invest that money back in) and you then get paid further dividends or interest. Effectively your growth is fueling further growth and over time this can massively add up.
In a pension, the difference between being and millionaire in your pension or not can simply be the length of time you’ve been investing for.
FreeTrade: A Beginner-Friendly Platform (with Perks!)
So what’s the best way to invest in an ISA or a SIPP? Well in my view (again I’m not a financial advisor), it’s through Free-trade
Free Trade is a brilliant app. I use it and find it amazingly easy to use. It’s easy to set up. You’ve got access to most shares, bonds, and other investment products that you’d ever want to get involved in (certainly as a starting investor).
And the real beauty is that the trades cost nothing. It’s especially good value if you pay the premium fee and if you can manage to save up enough money to put £4k in your tax-free ISA and keep the cash there. Any case earns interest at a rate that covers the subscription (apart from the tax, of course, referencing what I said above).
Invest in Yourself: Open an Account and Claim Your Free Share
If that’s not enough if you want to set up an account and get a free share worth between £10 and £100, click the link below (the first 10 people each month will get access to this offer).
All you have to do is set up a free trade account deposit 50 pounds and you get a free share. What a result.
I’ll get a free share too … so thank you!
The Final Word: Disclaimer & Open Invitation to Financial Experts
I hope you found this post about a side hustle in stocks and shares informative and useful and if anyone out there is a financial advisor, I’d love to hear your point of view on what I’ve said.