How much you need to invest to make $100, $500, $1000 a month in passive income

What if instead of spending your money you could put them to work, bringing you even more money? Sounds enticing? Building a money-making machine, rivaled only by Jerome Powell’s money printer, might require a lot of discipline but in practice, it’s rather simple.

via GIPHY

Okay, maybe I’m overexaggerating. It probably won’t match Powell’s magic trick of pulling seemingly endless money out of his… Treasury department. But what if you could make between $100 and $1,000 a month in passive income, just from investing?

Although a hundred dollars extra per month might not be a life-changing amount, depending on your lifestyle, it could drastically increase your quality of life. But enough chit-chat, how can you achieve it?

That’s what I’m going to try and answer today. Here are some other things you’ll find in this article:

  • A joke about Jerome Powell’s money printer.
  • How much you need to invest to make $100, $500, or $1000 a month.
  • What to invest in to best achieve it.
  • What you could spend your extra money on to increase your quality of life (according to me, at least.)

So what are we waiting for? Let’s get going! We’ll start by looking at how much you need to invest to make your preferred (read: realistic) amount of “extra” money.

How much you need to invest to make $100/month

Yowza, an extra hundred bucks per month! Imagine the stuff you could potentially buy each month for $100. You could:

  • Probably get 10 pizzas, depending on the size and where you’re getting them.
  • Get some new clothes.
  • Buy games. Board games, PC games, Xbox games, Nintendo Switch games. I don’t know, whatever turns your crank.
  • Donate to charity. It’s proven (I think) that good deeds make us happier (don’t quote me.) So you could actually buy happiness with a hundred dollars.
  • REINVEST IT to start compounding interest.

Anyway, let’s continue by looking at what you came here for, how much you need to invest in order to make $100/month. Below is a table showing you how much is needed at different percentage returns.

For example, with an investment yielding 10% per year, you would need to invest $12,000 to get an annual return of $1,200. Split that between the year’s twelve months and you end up with $100 per month.

Annual Return/YieldInvestment Required
to Make $100/Month
1%$120,000
2%$60,000
3%$40,000
4%$30,000
5%$24,000
6%$20,000
7%$17,142
8%$15,000
9%$13,333
10%$12,000

How much you need to invest to make $500/month

Five hundred bucks. Now we’re talking. This is where we could potentially be talking about life-changing money. It depends on what you mean by life-changing and how much bacon you’re bringing home. If your income is $300,000, an extra $500 per month is, as they say in Sweden, “like a fart in outer space.”

But for an extra $500 per month you could:

  • Do anything you could with $100 but more, like potentially get 50 pizzas, depending on the size and where you’re getting them.
  • Get a newer and better car.
  • Get someone to clean your house every week. We all know you need it.
  • Donate to charity. I wonder if there’s a correlation between how good a deed is and how happy you become. If so, you could potentially buy more happiness than you could with $100. Unless, and bear with me, how “good” the donation is actually depends on how much you donate in relation to what you make. In that case, someone making $30,000 a year and donating $100 a month would gain more happiness than someone making $155,000 and donating $500 a month. I’m getting off track, let’s continue.
  • REINVEST IT to start compounding interest.

Here’s the table for how much you need to invest to make $500 a month:

Annual Return/YieldInvestment Required
to Make $500/Month
1%$600,000
2%$300,000
3%$200,000
4%$150,000
5%$120,000
6%$100,000
7%$85,714
8%$75,000
9%$66,666
10%$60,000

How much you need to invest to make $1,000/month

Who wouldn’t want an extra thousand each month? Now you’re in the big leagues. Okay, maybe not the BIG leagues, but you for sure have more freedom than the average guy.

And here’s what you could do with an extra $1,000/month:

  • Pay off debt. Not that you couldn’t with $100 or $500 but with $1,000 you can pay off… $1,000 worth of debt each month.
  • Start a side hustle.
  • Take a thousand dollars worth of days off to pursue a hobby or start a project (or finish one you’ve already started. Yeah, I know you.)
  • Donate to charity.
  • REINVEST IT to start compounding interest.

And here’s the table:

Annual Return/YieldInvestment Required
to Make $1,000/Month
1%$1,200,000
2%$600,000
3%$400,000
4%$300,000
5%$240,000
6%$200,000
7%$171,428
8%$150,000
9%$133,333
10%$120,000

So now that we know how much you need to invest to make an extra $100, $500, or $1,000 per month, let’s continue by looking at what you could invest in.

Dividend Investing

This is probably the first thing that comes to mind when talking about semi-reliable ways of making money through investing. But as always, there are no guarantees in the stock market.

A dividend is simply a distribution of a company’s leftover profits to its shareholders. It’s usually a good sign of a healthy company since a dividend is essentially saying: “Hey, we have too much money to reinvest in the business, we have to give some of it to the shareholders.”

That’s best-case at least. Worst case, the management has no idea how they should be allocating resources.

When it comes to dividend investing, you have some options:

  1. You could construct your own portfolio of dividend stocks. Just make sure you don’t just look at the yields and pick the highest ones. Don’t compromise safety for a higher yield. Or do. It’s up to you.
  2. You could invest in a dividend ETF or mutual fund. The upside is that they offer the opportunity of becoming adequately diversified with a single purchase. The downside is, well, you don’t get to pick the individual stocks. Here’s how ETFs and mutual funds distribute dividends (The article is about how index funds distribute dividends, but it works the same.)

When looking at dividend yields anything from 1% up to 6, 7% is not unusual. Here’s a list of 25 high dividend ETFs, the highest one having a dividend yield of 8.56%. Most stocks and ETFs distribute dividends quarterly, but there are some ETFs that distribute monthly.

Bond Investing

Another option for a more reliable income is investing in bonds. A bond is basically a loan by an investor to a borrower (usually corporate or governmental.)

Bonds can generally be considered less risky than stocks for two reasons:

  1. They are less volatile since there’s less uncertainty regarding them. You know what to expect from them in terms of interest, which is far more than you can say about stocks.
  2. When buying bonds, you’re investing in debt, and when buying stocks, you’re investing in equity. And because debtholders have priority over shareholders, if the company goes bust, debtholders are first in line to receive their money. So while shareholders often are left empty-handed, debtholders can usually get at least some of their money back.

Your options when it comes to investing in bonds are essentially the same as with dividend stocks, invest in individual bonds or a bond ETF or mutual fund. The latter is probably preferable since buying individual bonds is not as hassle-free as buying stocks and usually requires a minimum amount invested.

I’m not going to say anything about yields since they differ so much between different bonds. What I will say, though, is that high-yielding bonds are often high-yielding because they are considered riskier, while a low-yielding bond usually has a low yield because it’s perceived as a low-risk investment.

On a side note, government-issued Treasury bonds are generally the safest and are usually considered to be a zero-risk investment, which I’m not sure I agree with. In the short term, sure. But as a long-term investment, they’re almost a guaranteed way of losing money because of their low yields.

The reason is inflation. In the long run, you’re highly unlikely to outpace inflation with low return investments. And if general prices are increasing more than your money grows, you won’t be able to purchase as much as you could to begin with, i.e., you’re losing money. So it’s not a “zero-risk investment” in all cases.

Conclusion

Whether it’s $100, $500, or $1,000 a month, extra money is always nice. And although I don’t know your specific situation and what you begin with, I do know you have to start in order to finish.

You would probably be amazed at what compounding interest can do for your personal economy and life. And again, the key is beginning with whatever you have.

I sincerely hope you have at least gained some inspiration on how you could go about earning a passive income from investing. Good luck!

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