With the right discipline and investments and a long enough timeframe, I believe every investor can make £1m from the stock market. For tax efficiencies, I think this is best done in an ISA. This will help you reach the £1m mark quicker.
Best of all, I think it can be achieved for £75 a week. It’s a misconception that investing is just for the rich. You can get started with very little cash and build up your ISA steadily over time.
Investing part of my income every month
This is why I invest part of my income every month into my ISA. Over time, the money compounds creating a path to prosperity. This persistence is an important trait to try and instil in yourself if you’re to make it to a £1m ISA.
By investing just £75 a month in an ISA of shares which provide income and growth I reckon anyone can reach a £1m within 30 years. That’s less than most people’s time employed in work. So when you think about it, it’s not that long. It can be much less as well. If you start with money already in an ISA and can up your average rate of growth to above 10%, the time it takes to reach £1m will dramatically reduce.
Investing in income and growth
In my plan, I’m focusing on a combination of growth and income. I invest for dividends to benefit from compounding. This is where dividends build year-on-year as you reinvest income in more shares. These then pay more dividends the next year.
Aligned with this, I’ll invest in some lower-yielding companies with reasonable P/E ratios to add some higher growth to my portfolio.
I think, as a private investor, this flexibility in approach is one of the advantages I have over institutions which are usually bound by rules for their funds and trusts. I can invest as freely as I want and pick the best companies that give me both income and growth potential. Thirdly, I can also invest for the long term and not worry about any market bumps or drops.
Keeping a diverse ISA portfolio
To further reduce the shock of any market fall, I’ll keep a diverse set of holdings in my portfolio. This means having companies from different industries, operating in different parts of the world.
I’ll focus mainly on UK shares. Though, over time, I may add shares from the US and hold funds and trusts which give me exposure to, for example, emerging markets. Or to an exciting new industry like artificial intelligence.
Following all these steps, I believe I can take modest earnings and turn it into a £1m ISA portfolio. If I can be consistent with my investing, then it’s definitely possible. The maths show this, and it’s the same for every investor.