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Generating an annual income of £100k will not happen overnight for most investors. But by using the power of compounding returns, it is possible to build such a sum over time, even when you start with just a large amount.
Here, I will explore a strategy that investors can use to build the foundations of a high income portfolio.
Four basic categories
The typical arc of an investor’s journey (say, 25 to 50 years) goes like this:
- Growth phase: Focus on high-risk investments to build wealth. These will be mostly quality growth stocks, with perhaps a few high-risk, high-reward moonshots.
- Balanced: Diversify with a mix of growth, blue-chip stocks, and dividend stocks. Moderate risk as wealth management becomes more of a focus.
- Income category: Switch more to income stocks, bonds, and mutual funds. Shares are not guaranteed, so diversification will still be necessary to reduce risk.
- Retirement: Prioritize fixed income investments and savings. Mitigate risk to ensure reliable cash flow for living expenses.
For an investor to start at that time, it will probably be by building a portfolio with investments focused on growth.
Product strength
One growth stock an investor with £1,000 might consider today Uber Technologies (NYSE: UBER). There are five main reasons why, in my opinion.
First, the price has dropped from $86 to $60 since mid-October. Therefore, investors can pick up shares of the ride-hailing giant at a price 30% cheaper than before.
Second, this means that the valuation is very attractive. Currently, Uber stock trades at a forward earnings ratio (P/E) of 23.7. That’s about the average for the S&P 500 now (24). However Uber is not what I would call a scale!
Third, Uber shares are currently not much higher than their 2019 public debut of $45. Yet in that time, it has gone from a business that was losing more than $4bn a year to one that was able to generate free cash flow of $7.7bn. in 2025.
Next, Uber has an incredible product. Like Google, it’s synonymous with what it does. In other words, it is a taxi idiom, which means that it has a sense with consumers and is highly trusted. I believe this gives it a lasting competitive advantage.
Finally, the company still appears to have plenty of growth opportunities left in the tank. This includes a high-quality advertising business, of course Amazon A subscription system like Uber One, train ticket booking, and more.
Uber One now has more than 25m members, and new subscribers spend four times as much as non-members at signup. Sticky platforms like these often prove to win investment over time (for proof, see the likes of Netflix again Booking Holdings).
There are risks, of course, including those that control the isolation of its drivers. Also, robotaxis could be a threat one day, although I personally blame the Uber platform (with 161 m monthly active customers) will be the central market for booking robots.
The £100k income guide
A return of 8%-10% is the historical market average. Investing £700 a month on top of an initial £1,000 at a 10% return can build a portfolio of £1.7m in just under 32 years (but it’s not guaranteed, of course).
Then it’s just a matter of changing strategies from growth to profitability. A portfolio of this size yielding 6% would generate a second income of £100,000.
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