The idea of earning $1,000 a month in passive income — just for owning shares — is something many investors dream about.

But the good news is, this goal is not only possible, it is more achievable than most people think.

By building a portfolio of dividend-paying ASX shares and exchange traded funds (ETFs), investors can turn their hard-earned savings into a reliable stream of income. And with time, discipline, and the right investments, that stream can grow into something truly substantial. Here's how to do it.

Step 1: Know your target

If you want to earn $1,000 per month, you'll need $12,000 in annual dividends.

A mix of high-quality ASX dividend stocks and income-focused ASX ETFs can easily yield between 5% and 6% per year — meaning $200,000 to $240,000 is a realistic target to generate $1,000 per month in passive income.

Step 2: Pick your ASX passive income investments

Building a portfolio is your next step. Here are a couple of ASX ETF options that can help get you there, without having to pick individual stocks:

Vanguard Australian Shares High Yield ETF (ASX: VHY)

This popular ASX ETF provides exposure to large, reliable Aussie dividend payers — including banks, miners, and telcos. It is diversified, low-cost, and has a dividend yield around 5%.

Betashares Australian Top 20 Equity Yield Maximiser (ASX: YMAX)

This ASX ETF targets income from the top 20 ASX stocks and uses a covered call strategy to enhance yields. It is designed for investors who prioritise income over capital growth, and typically offers a yield close to 7%.

Of course, if you're comfortable choosing individual shares, companies like Telstra Group Ltd (ASX: TLS), APA Group (ASX: APA), and Accent Group Ltd (ASX: AX1) have also been popular among passive income-focused investors in recent times.

Step 3: Stay consistent

Building a six-figure income portfolio doesn't happen overnight. But with regular contributions — even $500 to $1,000 a month — and by reinvesting your dividends in the early stages, you'll be surprised how quickly it can grow.

Using the power of compounding, every dollar you earn in dividends (and reinvest) helps bring you one step closer to your $1,000-per-month goal.

For example, $500 a month generating a 10% annual return would turn into $200,000 in 15 years, whereas $1,000 a month would take just 10 years.

Foolish takeaway

A passive income stream of $1,000 per month from ASX shares is well within reach — especially if you use the right tools and stay consistent over time.

Whether you get there with ASX dividend stocks, income-focused ETFs, or a bit of both, the key is to start building now. Because the sooner you start, the sooner your money can start working for you — while you sit back and watch the dividends roll in.