Saving £200 per month? Here's how I'd aim for a second income of £36,469

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Investing in stocks and shares allows us to earn a second income by taking advantage of their growth and payouts to shareholders in the form of dividends. While many people in the UK may prefer other routes, such as investing in rented properties, I believe that stocks and shares offer the best returns and the most flexibility.

So, how can I turn a £200 monthly contribution into a great second income? let's find out.

compounding is key

£200 a month, or £2,400 a year may not seem like a huge amount to put aside, but it adds up over time. In fact, £200 per month is the amount I put into my daughter's Stocks and Shares ISA every month, and it's adding up nicely. After five months, we have experienced a 30% increase in monthly contributions.

Of course, it is unlikely that this pace of growth will be sustained for the next 18 years, but growth will continue to increase. So, even if my current growth slows down to about 10% per year – I'm still aiming for much higher – she'll have £121,113 when she 'comes of age'.

I say this for illustrative purposes because there are many variations of how we can reach our desired endpoint. If I continue with £200 a month, achieving 10% growth a year, I will have enough capital to generate £36,469 a year.

However, this requires me to grow my portfolio wisely over three decades. This is completely achievable, because growth is compounded. But I need to recognize that wrong investment decisions can waste my money.

my portfolio is growing

There are many exceptions, but I look to the US for my growth-oriented investments. nvidia, super micro, Powell Industries, CRISPR Therapeutics One of the investments I have made in the last year has yielded gains of over 50%.

AppLovin (NASDAQ:AP) This is another investment that worked out well for me. But I still like it a lot and am considering investing more.

AppLovin is a software company that specializes in maximizing advertising revenue for its clients. It operates in a thriving industry and has an excellent track record of beating market expectations – a good sign.

One area of ​​concern is that it is still heavily indebted and growth has historically been unsustainable. However, since last year, it has been thriving even in difficult conditions.

In the fourth quarter, AppLovin reported earnings per share of $0.49, beating expectations by $0.14. Additionally, revenue for the quarter was $953.26 million, representing a significant increase of 35.7% year-over-year and exceeding estimates by $25.23 million.

However, the most compelling aspect of AppLovin lies in its projected growth over the medium term spanning the next three to five years. Although the stock's forward price-to-earnings ratio is relatively high at 31 times, its price-to-earnings-to-growth ratio is an attractive 0.62. This suggests that AppLovin's growth potential may be undervalued. In fact, on a forward basis, the stock is trading at a modest 13.7 times earnings.

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