Passive income doesn’t have to mean selling a property or building a business from scratch. For ordinary investors with a Stocks and Shares ISA, it can be as simple as picking the right companies to invest in, and letting them do the heavy lifting.
But how much can investors realistically expect to make from a £20,000 starting pot?
The index tracker route
The key to success is patience. Investing £20,000 in a low-cost FTSE 100 index fund enables investors to earn the same return as the wider UK stock market. And historically, that’s typically sat at around 8% a year including dividends.
Given enough time, that £20,000 starting pot will eventually grow into £250,000. And when following the 4% withdrawal rule, that’s enough to generate a £10,000 annual or £833 monthly passive income, even without putting in any extra money.
The catch? Compounding at 8% with no additional top-ups takes around 32 years to get there. What if there’s a faster way?
Accelerating the compounding process
Rather than trying to match the stock market’s average performance, why not try to beat it?
That’s the mission of every stock picker. And while this strategy demands far more skill and discipline, the results can be game-changing. And Plus500 (LSE:PLUS) is a compelling illustration of what’s possible.
Over the last seven years, Plus500 shares have delivered a staggering total return of 1,146.9%. That means anyone who invested £20,000 in June 2019 is now sitting on a staggering £249,380 – enough to unlock a £831.27 monthly passive income!
Still worth considering?
With so much growth under its belt, and a market-cap of £3.4bn, it’s unlikely that Plus500 shares will deliver another 12.5x return between now and 2033. But that doesn’t mean the growth story is over. In fact, its latest first quarter results for 2026 were pretty impressive.
The trading platform saw customer income surge 53% to a five-year record high of $270.6m. Subsequently, revenue climbed 18% to $242.1m, new customer sign-ups jumped 48%, and active customers rose 21%.
In turn, EBITDA landed 2% higher at $95.7m while the balance sheet remains debt-free and flooded with $780m of spare cash. And management has now raised its full-year guidance ahead of analyst expectations.
Simply put, the company is thriving. So is this a no-brainer?
Where’s the risk?
As a trading platform, Plus500’s earnings are inherently tied to market volatility. When volatility spikes, trading activity surges and revenues follow. But when markets are calm, the opposite starts to happen.
Given the volatile nature of the stock market in recent years, that hasn’t proven to be a major issue of late. However, there does appear to be some weakness creeping in. And I’ve already highlighted it.
The fact that revenue grew by 18% but EBITDA only managed 2% reveals that margins are under pressure.
The company is investing heavily to attract new customers to its platform. While higher earnings do signal value creation, it appears to be relatively modest. And if margins continue to shrink and trading activity suffers simultaneously, Plus500 shares could turn volatile very quickly.
Nevertheless, with a long track record of navigating market cycles paired with a relatively undemanding price-to-earnings ratio, now might be a good time to consider taking a closer look at this enterprise.
Should you invest £5,000 in Plus500 right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.
And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Plus500 made the list?
Zaven Boyrazian does not hold any positions in the companies mentioned.
