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Gen Z Investors: Create a Stable Passive-Income Stream of $188/Month for Retirement

·4 min read
Payday ringed on a calendar
Payday ringed on a calendar

Written by Amy Legate-Wolfe at The Motley Fool Canada

Generation Z has become one of the largest investors over the last few years. Many have started their careers, using the stock market to create more wealth, as growth stocks climbed higher and higher.

But that growth has gone downhill fast over the last few months. Now, we’ve entered market correction territory and could be in for a recession, if a mild one. Even if that doesn’t happen, Gen Z investors should realize there is a lesson to be learned: be prepared with more than just growth stocks.

How to prepare

Let’s look at what Gen Z investors may want to consider in the future. Now is an excellent time to get started, as stocks continue to trade well below fair value. In fact, many strong, blue-chip companies continue to trade in either oversold or value territory. So, you can pick them up with stellar returns.

Since you’re young, you can still have a somewhat riskier portfolio. That’s because you have literally decades to see your wealth grow. A rule of thumb that comes up a lot is assuming you’ll live to 100; take your age away from that 100 to decide how much should be in stocks and how much in bonds.

So, if you’re 25, you would invest 75% in stocks, including exchange-traded funds and the like, and 25% in bonds. Then you can fluctuate that number as you grow older and need to consider your financial future once more — say, when kids come along, you buy a house, or start making more money.

Where passive income fits in

Whether you’re an investor just starting out or a few years from retirement, passive-income stocks should be a part of your portfolio. They can give you cash each quarter and sometimes each month simply for owning a stock.

But Gen Z investors have even more to gain. You can create a passive-income stream you can then use to reinvest in your portfolio. When you’re young, you don’t have a lot of cash on hand. That means you may be missing out on investing opportunities because you simply don’t have any cash flow available.

Passive-income stocks solve that problem. You can use the cash to reinvest, letting it collect until you have a large enough amount to invest. Plus, you can collect it until there’s a dip in the share price that will allow for a quick return on investment. Like right now!

An option to consider

One of the best passive-income stocks on the TSX today, in my opinion, is NorthWest Healthcare Properties REIT (TSX:NWH.UN). The healthcare real estate investment trust (REIT) can provide Gen Z investors with monthly passive income. That income is directly tied to a diversified portfolio of any real estate related to the healthcare business. That includes everything from hospitals and doctors offices, to office space and parking garages.

You therefore also get access to cash flow from an essential service on the TSX today. And we all know that’s necessary in these pandemic times. And likely will be in the future as well. And with a high, stable occupancy rate and growing business, NorthWest is a solid option as a passive-income option at a dividend yield of 6.15%.

Foolish takeaway

Gen Z investors who have $5,000 on hand could start bringing in $307 each year by investing on the TSX today. But let’s say you reinvest that cash again and again as the years go by, adding just $1,000 each year. That alone would turn your portfolio into $30,328.40 in a decade, bringing in $974 in dividends a year, or $81 per month. Keep doing this until you retire, and you could have a portfolio worth $379,448.03! That’s while bringing in $2,250 per year and $188 per month.

The post Gen Z Investors: Create a Stable Passive-Income Stream of $188/Month for Retirement appeared first on The Motley Fool Canada.

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More reading

Fool contributor Amy Legate-Wolfe has positions in NORTHWEST HEALTHCARE PPTYS REIT UNITS. The Motley Fool recommends NORTHWEST HEALTHCARE PPTYS REIT UNITS.


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