Invest £355 Monthly to Build a Second Income Beyond State Pension

Securing a second income through investments can provide financial stability, particularly as the UK State Pension currently offers just £230.25 per week, totaling approximately £11,973 annually. This amount falls short of the minimum experts suggest individuals need for a comfortable retirement. By investing £355 a month in selected UK shares, individuals can aim to generate a second income that significantly surpasses the State Pension.

Investment Strategy Overview

The goal is to create a second income stream of approximately £23,946 annually, which, when combined with the State Pension, would amount to a total of £35,919 per year. To achieve this, investors can focus on dividends from shares, capitalizing on their potential for higher returns. Currently, the FTSE 100 index offers a yield of 3.06%, meaning that for every £100 invested, an investor can expect to earn £3.06. To reach the £23,946 target solely through this yield, a portfolio worth £782,550 would be necessary.

Fortunately, there is an alternative method. By selecting high-yield stocks, investors could target a yield of around 6%. This would reduce the portfolio requirement to £399,100. While still substantial, this figure is more attainable for many. If an individual invested £355 monthly, assuming a 10% total return—comprised of 6% from dividends and 4% from capital gains—the portfolio could grow to approximately £400,000 within 24 years.

Considerations for High-Yield Investments

Investing in high-yield stocks requires careful consideration. Higher dividend payouts often come with increased risk. One stock worth examining is **Domino’s Pizza Group** (LSE:DOM), which has seen a decline of 41% since the start of the year. While this downturn is concerning for current shareholders, it presents a potential opportunity for new investors, offering a dividend yield of 6.1%.

Domino’s is currently facing challenges, as consumers reduce discretionary spending on takeout meals. This has resulted in stagnated growth and squeezed profit margins due to rising costs. Nevertheless, the company maintains a solid balance sheet, allowing management to invest in future growth initiatives. For instance, Domino’s is introducing new products, such as the Chick a ‘Na’ Dip, and plans to launch a loyalty program next year. An automated logistics center is also under construction, aimed at enhancing operational efficiency and profit margins in the medium term.

Despite the uncertainties surrounding the takeaway market, the low price-to-earnings ratio of 9.2 indicates that investor expectations may be set low. A modest recovery could lead to significant gains for Domino’s shares. This stock, among others, could be crucial for investors looking to exceed the State Pension.

Investment expert **Mark Rogers** has identified several standout stocks for consideration, including Domino’s. With nearly a decade of experience managing the **Motley Fool Share Advisor** newsletter, he has guided many investors in selecting promising stocks from both the UK and US markets.

In summary, investing £355 a month in high-quality UK shares can provide a valuable supplement to the State Pension. With informed choices and a strategic approach, it is possible to build a second income that not only meets but exceeds basic retirement needs.