The idea of becoming a millionaire holds a lot of appeal for many people. A million pounds may not be worth what it once was – but it is still a substantial sum.
Rather than trying to aim for a million with some hare-brained scheme, I would take a methodical, long-term approach to such a goal by investing regularly in shares.
Putting aside some money every day
If I put aside £25 a day, that would add up to around £750 each month to invest. Over time, hopefully, that money could itself earn money, for example if I earn dividends from shares I buy.
I would keep saving daily. That would help lay the foundations for my long-term financial success. And although £25 a day is a lot to save, I think if an investor seriously wants to aim for a million, it takes effort.
Building a buy and hold portfolio
The basis of my plan would be to invest the money in shares. I would not try to exploit short-term price movements the way a trader does. Instead I would adopt the approach of a long-term investor.
This means looking for shares I think offer me outstanding value relative to their long-term prospects. That way, I could hopefully let time show the quality of the companies in which I invested.
Most important, I would focus on large, well-established companies with proven business models and a track record of profitability.
Going for growth?
That would knock some early-stage growth companies out of my reckoning. But if I wanted to, I could still base my portfolio on growth companies that met my investment criteria, like Google parent Alphabet.
Or I might invest in income picks such as Direct Line and compound the dividends year after year. Rather than make a choice between the two approaches, I could also opt for a blend of growth and income strategies.
Whatever I chose, I would keep my portfolio diversified to reduce the impact if one of the shares I owned performed poorly.
I’d aim for a million!
Imagine I aimed for a 10% annual increase in the value of my existing shares before considering the new money invested, either from share price growth, dividends, or a combination of both. That is aggressive but I see it as achievable. Direct Line, for example, currently has an annual dividend yield of 11.1%.
To aim for that million pounds means if I managed to get a 10% annual return I would hopefully hit my target after 26 years.
Not only that, I might earn a sizeable passive income if I chose. For example, after 26 years if my portfolio was earning a 10% dividend yield and I decided to start taking that as cash instead of compounding it, I could earn £2,000 every week on average in dividends.
So I think that could be worth me putting aside £25 each day in a share-dealing account, starting today!