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Image source: Getty Images<\/p>\n
ASX shares are among the most effective assets at generating income for investors. They could be a great choice to build a second income. <\/p>\n
We all only have so much time to work for earnings. It’d be beneficial to have a portfolio of shares paying a growing source of passive income<\/a> to our bank accounts that we don’t have to actively work for ourselves.<\/p>\n How much of a second income could a $20,000 investment pay? That entirely depends on the dividend yield<\/a>.<\/p>\n For example, if someone’s portfolio had a 5% dividend yield, then $20,000 would generate $1,000 of annual income.<\/p>\n That’s just the first year, though.<\/p>\n If the payout grew at a compound annual growth rate (CAGR)<\/a> of 7.5% for the foreseeable future, it would grow into $1,436 of annual income after five years and $2,061 after ten years.<\/p>\n That sounds good, right?<\/p>\n The next question is what to invest in. <\/p>\n Many of the most popular ASX-listed exchange-traded funds (ETFs)<\/a> aren’t known for having good dividend yields. I’ll run through some compelling options. <\/p>\n Portfolio investments <\/p>\n When we think about investing in a particular company, like BHP Group Ltd (ASX: BHP<\/a>), that money is allocated to just one business. <\/p>\n Wouldn’t it be great if we could put our money into an investment and it’s already diversified instantly?<\/p>\n There are some investments that can provide a pleasing mixture of both a good dividend yield and capital growth. I’m thinking of investment businesses like Washington H. Soul Pattinson and Co. Ltd (ASX: SOL<\/a>), MFF Capital Investments Ltd (ASX: MFF<\/a>), and Future Generation Australia Ltd (ASX: FGX<\/a>), which have a good long-term record of payout growth. I think these are great options for a second income. <\/p>\n I’ll also point out a couple of impressive actively-managed ETFs that target a dividend yield for investors and have strong long-term portfolio performance, such as WCM Quality Global Growth Fund (ASX: WCMQ) and Montgomery Global Equities Fund (ASX: MOGL<\/a>). <\/p>\n Companies <\/p>\n There are a number of companies on the ASX that derive their earnings from operations.<\/p>\n I’d only focus on businesses that have an attractive long-term future and that have a history of growing their payouts and offer a good dividend yield today. <\/p>\n Some of the most appealing ASX dividend shares, in my opinion, are Telstra Group Ltd (ASX: TLS<\/a>), Wesfarmers Ltd (ASX: WES<\/a>), Medibank Private Ltd (ASX: MPL<\/a>), Pinnacle Investment Management Group Ltd (ASX: PNI<\/a>), Shaver Shop Group Ltd (ASX: SSG<\/a>), and APA Group (ASX: APA<\/a>). <\/p>\n Real estate investment trusts <\/p>\n The final area of investments that could unlock a pleasing second income is real estate investment trusts (REITs)<\/a> \u2013 these are businesses that own significant commercial real estate.<\/p>\n There is a wide variety of REITs that Aussies can buy, including industrial, shopping centres, farms, self-storage, office, social, and healthcare.<\/p>\n Investors can benefit from the rental profits as well as the long-term appreciation of land prices. Some of my favourite REITs for income and capital growth are Centuria Industrial REIT (ASX: CIP<\/a>), Charter Hall Long WALE REIT (ASX: CLW<\/a>), Rural Funds Group (ASX: RFF<\/a>), and Abacus Storage King (ASX: ASK<\/a>). <\/p>\n","protected":false},"excerpt":{"rendered":"Image source: Getty Images ASX shares are among the most effective assets at generating income for investors. 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