Buying UK shares has become much easier and far more accessible over the past couple of decades. Previously, an investor would need to have a significant sum of money to buy shares due largely to high commission costs. However, online share-dealing means that buying small amounts of British shares is open to almost anyone.
Therefore, now could be a good time to start buying FTSE 100 and FTSE 250 shares instead of playing UK lottery games. They could produce higher returns in the long run, and increase your chances of retiring early.
Accessing UK shares
It is possible to buy small amounts of UK shares often to build a surprisingly large retirement nest egg. For example, the cost of a UK lottery ticket is currently £2 per draw. This equates to £8 per week if you buy two tickets for each draw, as many people do. Over the course of a year, that adds up to £416.
That may not sound like an amount large enough to warrant investing in FTSE 100 and FTSE 250 shares. However, with dealing costs being as little as £1.50 per trade, you could purchase stocks on a quarterly basis, for example, without racking up large trading costs that hamper your portfolio’s growth prospects.
The returns on FTSE 100 and FTSE 250 shares
UK shares have a long track record of producing impressive total returns. For example, the FTSE 100 has delivered an annualised total return of around 8% in recent decades. Assuming the same rate of return on your £416 annual investment that was previously used to purchase UK lottery games, you could end up with a portfolio valued at £123,000 over a 40-year working life.
Clearly, £123,000 is unlikely to be enough to provide a generous passive income in retirement. However, the example serves to show that even modest investments in the stock market can produce surprisingly large portfolio valuations. Compared to the odds of winning the National Lottery, which are around one in 45m, the stock market could prove to be a more worthwhile use of your disposable income.
Building a retirement portfolio
The more you invest in UK shares, and the longer the time period, the larger your future nest egg is likely to be. Therefore, you may find that it is possible to increase your regular investment over time from the aforementioned £416 per year to a higher figure. Over the long run, doing so could make a positive impact on your retirement plans.
As such, now could be the right time to start buying even modest amounts of FTSE 100 and FTSE 250 shares. The stock market has become far more accessible in recent years. It can provide anyone who has even a modest amount of spare capital with the opportunity to improve their financial position in the coming years.