Turn your savings into a passive-income powerhouse with 2 ASX stocks

This could be the way to make the share market work for you.

| More on:
Hand holding Australian dollar (AUD) bills, symbolising ex dividend day. Passive income.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you're sitting on a healthy amount of savings — say, $100,000 — and you're not quite sure what to do with it, you're not alone. For many Australians, cash in the bank can feel safe, comfortable, and convenient.

But what if that $100,000 could do more than just sit there?

With interest rates on the way down and term deposit returns expected to soften, now could be the time to put your savings to work by building a passive-income portfolio with ASX shares.

Sure, there's more risk in the share market than a government-guaranteed bank account. But the potential rewards — especially over the long term — can be significantly greater.

Here's a simple two-stock strategy that could help turn idle savings into a growing stream of income.

Vanguard Australian Shares High Yield ETF (ASX: VHY)

Allocation: $90,000

If you're looking for a reliable foundation for an income-focused portfolio, the Vanguard Australian Shares High Yield ETF is an excellent place to start. This ASX ETF gives you exposure to high-dividend-paying Australian shares, including many household names in sectors like banking, resources, healthcare, and consumer staples.

It's broadly diversified, low-cost, and currently offers a 12-month trailing dividend yield of 5% — which means your $90,000 allocation could generate around $4,500 in annual passive income, even before factoring in franking credits or potential dividend growth.

This is a set-and-forget option ideal for investors who want income, diversification, and a stress-free way to invest in the Australian market.

GQG Partners Inc. (ASX: GQG)

Allocation: $10,000

If you're comfortable adding a little more risk for potentially higher returns, GQG Partners could be the second piece of the puzzle.

This global fund manager is currently rated as a buy by Goldman Sachs, which sees upside in both earnings and dividends. The broker has a $3.20 price target on GQG shares — well above the current price of $2.13 — and is forecasting generous fully franked dividend payments in the coming years.

It has pencilled in dividends of 15 US cents in FY 2025, 17 US cents in FY 2026, and 19 US cents in FY 2027. At today's exchange rate, that equates to roughly 24 Australian cents per share in FY 2025, or an eye-catching dividend yield of over 11% on current prices. That means your $10,000 allocation could generate more than $1,100 in annual passive income, assuming those forecasts are met.

Keep in mind, this is a higher-risk, higher-reward play. But GQG Partners' growing funds under management, strong profit margins, and shareholder-friendly dividend policy make it a compelling addition to an income-focused portfolio.

Foolish takeaway

Investing $100,000 into a blend of Vanguard Australian Shares High Yield ETF and GQG Partners gives you the best of both worlds — broad, steady passive income from some of Australia's most dependable companies, along with a higher-yielding global play with strong growth potential.

Yes, the share market carries risk. Prices can move, dividends can fluctuate, and patience is required. But for those willing to take a long-term view, the rewards — both in income and capital growth — can far outpace what you'll get from leaving your cash sitting idle.

In short: don't let your savings snooze — put them to work and let your wealth grow, one dividend at a time.

Motley Fool contributor James Mickleboro has positions in Gqg Partners. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. The Motley Fool Australia has recommended Gqg Partners and Vanguard Australian Shares High Yield ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on How to invest

ATM with Australian hundred dollar notes hanging out.
How to invest

How to turn the ASX into a passive income machine

It isn't as hard as you might think to generate big income from the share market.

Read more »

An older executive man dressed in suit trousers and a white shirt sits against a wall smiling with cash rains down over him representing dividend shares like BHP, FMG and Newcrest paying dividends in retirement
How to invest

How you can earn $10,000 a year in passive income from a $10k ASX 200 investment today!

Looking to boost your retirement with an extra $10,000 a year in passive income. Read on...

Read more »

A couple are happy sitting on their yacht.
How to invest

How soon can I become a millionaire if I invest $1,000 every month?

It might be shorter than you think.

Read more »

Couple holding a piggy bank, symbolising superannuation.
How to invest

How ASX shares can help you retire early

Here's what you need to do if you want to retire early.

Read more »

A close up picture taken from the side of a man with his head face down on his laptop computer keyboard as though he is in great despair over a mistake or error he has made or bad news he has received.
How to invest

Are you falling for any of these 6 common investment mistakes?

Biases can affect even the most savvy investors.

Read more »

A young woman sits at her desk in deep contemplation with her hand to her chin while seriously considering information she is reading on her laptop.
How to invest

Can you own too many ASX 200 stocks?

Today, we examine the ideal number of ASX 200 stocks to have in a share portfolio.

Read more »

Woman with a concerned look on her face holding a credit card and smartphone.
Share Market News

I've got $10,000 cash. What's the harm if I don't invest it in the next 5 years?

Investors may be nervous to invest at the moment.

Read more »

A man looking at his laptop and thinking.
How to invest

What could go wrong with owning just 10 ASX 200 stocks?

Is it enough to have 10 stocks in your portfolio? Let's find out.

Read more »