Whatever you think the future of the State Pension looks like, having a second income for when you retire can only be a good thing. And it’s surprising what might be possible.
According to the Financial Conduct Authority (FCA) around 10% of adults have no savings at all. But even for someone in that position at 50, it’s not too late to do something meaningful.
What’s possible?
The point of investing in the stock market is to make money. More accurately, it’s to do better than you would have by buying bonds or keeping your money in savings.
Last year the FTSE 100 generated a return of over 20%. That definitely ticks the making money box, but investors expecting that every year are likely to be disappointed.
There are years when share prices go down and an investment made in January is worth less in December. That doesn’t happen with cash and it’s something important to note.
Over the last 10 years, the average annual return from the FTSE 100 has been just above 8%. And this is more than enough to power someone to impressive returns over time.
No savings at 50?
Someone with no savings at 50 qualifies for the State Pension in 17 years. But that’s plenty of time to try and build investments that can generate a serious second income.
One of the best ways to invest is to put aside money from a regular salary. And even from a standing start, investing £100 a week can lead to something quite significant.
At 8% a year a £100 weekly investment turns into £182,306. And that could be enough to generate a £13,295 annual return, which an investor could use as a second income.
The obvious question, then, is which stocks someone should consider buying to aim for this kind of return. Fortunately, I think a few potential names stand out right now.
A FTSE 100 opportunity?
Rentokil Initial (LSE:RTO) is a stock that I hold in my portfolio. It’s not the most exciting, but I think the pest control industry is likely to be one of the most durable going forward.
The firm also has a strong competitive position. A merger from a few years ago has helped it achieve greater density than its rivals, which should result in higher margins over time.
No stock is entirely without risks. And Rentokil shareholders need to be wary of potential changes in legislation, which could make things more expensive or more difficult in future.
It’s also worth noting, though, that the stock trades at a significant discount to its main rival. As a result, I think it’s a relatively attractive way to invest in an incredibly resilient industry.
The stock market
Investing in the stock market can be a great way of building wealth over the long term. And anyone looking for a second income can look to use this to their advantage.
Getting started doesn’t take huge amounts of cash. What matters far more is working out what to invest in.
I think the key is figuring out which businesses will still be doing well 10 or 20 years from now. And Rentokil is one name I think should be on investor radars.
