Here’s how much an investor would need in an ISA to get a second $10,000 this year (and every year!)

One straightforward way to earn secondary income is to build a portfolio of Dividend stocks.

Not only does it involve a little real work, it can be very profitable. Step by step, here’s how an investor can use that strategy to direct £10k in income each year.

A lump sum is another way – but it’s not necessary

The income of the Chapter will depend on how much is invested and the average dividend yield.

For example, using a dividend yield of 5%, £10k in a second source every year would require an investment of $200

But the other way (and the one I use) is to try again Build an income goal over time by making regular contributions to Isa.

Even £200 a week compounded at 5% annually can lead to a $200K portfolio. Of course, it can take 14 years. But as a long-term investor, that’s music to my ears.

Finding shares to buy

An investor can also speed things up if the annual growth rate (ie share price movements and any dividends) was above 5%. But the split is never guaranteed – and prices can go down and up.

So I never pick a share because of its yield.

Instead, I try and find good companies that I think have very good business opportunities that in my opinion are not reflected well at their current price.

A Short Study Course

That sounds good in theory, but what about in practice?

Let me show you my assignment: shoe expert Crocs (NASDAQ: Crox). Over the past five years, Crocs’ share price has grown 149%: Far, far more than my 5% per year.

I missed that benefit, as I am a new stock holder. Good. This thing, even now, the company is trading at a price average of only 7.

That seems almost too cheap to me given the brand and product, large customer base, manufacturer management expertise and patented designs. I don’t like crocs – but I see a big business model when I see one.

Still, if the business is so good, why is it selling at that price – and why is it down 36% since June?

Its acquisition of Hello dude Brand Footwear has brought many problems and looks like a terrible value.

That is the risk of earnings. But I still think crocs is a good business at a great price and plan to hold shares.

Preparing to invest

But wait. Crocs don’t pay for the split. So where can the second income come from in such a situation?

Remember above I talked about a £200k portfolio invested at 5%. If it does not start with a lump sum, the investor does not need to invest in the shares of the Chapter nearby.

They can use a mix of dividend and growth stocks to build their portfolio value. Then, at the £200k mark, he can switch to just shares.

If the investor diverges and picks the right stocks, hopefully that second 10k will keep coming (and maybe growing) year after year.

But they need a good way to buy and hold those shares, which are like stocks and move quickly.