The lazy investor’s 5-step guide to retiring with a million

If you’re looking to begin building a sizeable pot of money from the market with the minimum of effort in 2018, you’ve come to the right place. On this most festive of days, I present the lazy investor’s strategy for building a million-pound portfolio.

Step 1: Make full use of tax-efficient accounts 

Making sure that you hold the vast majority, if not all, of your investments in a stocks and shares ISA might come across as a dull first step but it’s also one of the most important. Put simply, any gains you make are protected from the taxman. The impact of this may be fairly negligible in the early days but over the course of an investing lifetime, it could mean the difference between achieving millionaire status and not.

Thanks to sizeable increases in the annual allowance over the last few years, you can now stash up to £20,000 in a single ISA in 2017/18. Don’t waste the opportunity.

Step 2: Spend less than you earn

The second step should appeal to lazy investors since it involves doing a lot less of something, namely spending money on things you probably don’t need. And yes, that could include an iPhone X.

Having spent less than you earn, the next half of the step is simple: put the difference in your stocks and shares account. For added laziness, consider automating the process via a monthly direct debit if you suspect you might forget to do it manually.

Step 3: Buy trackers

We’re big fans of stock picking at the Fool. Nevertheless, those with no interest in the stock market beyond recognising it as a vehicle to grow rich over time should give consideration to investing in a basket of index trackers or exchange-traded funds. Not only do these wonderfully low-cost alternatives to managed (and usually worse-performing) funds allow you to capture the same returns as the markets, they’re also a brilliant way of building a diversified portfolio. 

If you’re seriously attracted to the idea of spending as little time on your investments as possible, a simple global equity tracker or exchange-traded fund, such as those provided by Vanguard or iShares should suffice. Those wanting a more balanced portfolio, giving exposure to other asset classes may prefer the fuss-free Life Strategy funds offered by the former. Whatever you decide, by investing at regular intervals — pound cost averaging — you also reduce the chance of buying at the top of the market. 

Step 4: Avoid temptation

Receiving dividend payments from the companies or funds we own is one of life’s little pleasures. That said, an even greater pleasure is seeing your wealth grow significantly faster through the reinvestment of these regular payouts and the power of compounding (interest on interest).

So long as you’re not relying on your portfolio to generate an income, you’d do well to avoid the temptation to withdraw this money. Why bother anyway? It’s too much effort.

Step 5: Be patient

The final step in the strategy is perhaps the most difficult of them all since it requires something that many of us lack, namely patience. So long as there isn’t a clear reason to question your holdings, cultivating the ability to put your feet up when those around you are making impulsive, emotion-fuleled decisions is critical if you’re to emerge from the markets a far wealthier individual.