If you’re planning to invest in UK shares, you might as well think big. You’re going to need a big pot of money to fund your retirement. If you could build a million pound portfolio, your financial worries would be over.
I would start by investing in UK shares, such as top blue-chip stocks listed on the FTSE 100. Don’t get carried away though, you won’t get rich overnight. In investing, patience is the ultimate virtue.
Many newbie investors get carried away by the prospect of making quick money. Their heads are filled with stories of investors who made fortunes by investing in global titans such as Apple and Amazon at launch. Or took an early stake in nippy UK growth shares such as Just Eat or Fevertree Drinks, and saw their money grow five or tenfold.
I’d buy UK shares to get rich and retire early
If you load up your portfolio with high-risk start-ups, you’re likely to pick as many losers as winners. You cannot expect to make a million on the stock market in five or 10 years. Instead, you should be looking to build your wealth over your entire working lifetime. Say, 30 or 40 years.
If you take the long-term view, and stick at it, you really could make a million. Remember to invest inside your Stocks and Shares ISA, that way your money will be free of tax for life.
I would start by building a balanced portfolio of UK shares, starting with some FTSE 100 names that offer a combination of capital growth and dividend income. Too many investors underestimate the importance of dividends. They will keep your portfolio ticking over, even at times like these, when share prices are highly volatile.
You need to reinvest all your dividends for growth at this point. You can draw them as income later, after you’ve retired.
Make a million, the slow way
Generating income from UK shares has got harder lately, as many top companies cut their dividends during the Covid-19 pandemic. However, you can still get dividends of 6% or 7% from the FTSE 100, with a bit of rooting around. A 7% yield would double your money in just over seven years, even if the share price didn’t grow at all.
Many will be nervous about investing in UK shares in the middle of the pandemic. The recovery looks set to be slow and bumpy, until we find a vaccine.
However, history shows that a crash is the ideal time to buy shares, as you can pick up top companies at reduced prices. Look for businesses with loyal customers and a deep ‘moat’ against competitors, as well as minimal debt and sustainable dividends.
Aim to hold these UK shares for the long run, to let the income and growth roll up. You can make a million, but it’ll take time and effort.