The stock market crash in March has left the FTSE 100 trading around 20% below its January peak of more than 7,500. While share prices recovered in April and May, there’s still a buying opportunity here for investors who want to create a £1m portfolio.
Almost nobody becomes a millionaire overnight from stocks and shares. The process takes a lifetime of investing, but it’s doable. What you must do is take advantage of massive buying opportunities, like the current one. This is your chance to pick up top FTSE 100 stocks at reduced prices.
Once you’ve selected a balanced portfolio of bargain shares, you should aim to hold them for the long term. Reinvest all your dividends for growth, and let compound growth work its magic.
You really can make a million on the FTSE 100
If you’ve a lump sum to invest, the aftermath of a stock market crash is a great time to put it to work. However, not everybody is that lucky. Most ordinary investors feed money into the market whenever they have a bit to spare.
A great way of doing this is to set up a regular monthly contribution to a Stocks and Shares ISA. You can invest from £25, or £50 a month, depending on the platform, although if you want to make a million, you’ll need to do more than that.
I reckon you can build a million pound portfolio for your retirement by investing £500 a month. You don’t have to be a genius stock picker to do it. Your most important resource is time.
If you’re 25 years old, it’s perfectly feasible to make a million by investing £500 a month. If your portfolio of stocks generates an average total return of 6.5% a year, after charges, it would be worth £1.12m by age 65.
This assumes you reinvest all your dividends back into your portfolio. If you invest in a Stocks and Shares ISA, all your returns are free of income tax and capital gains tax, for life.
Don’t waste this stock market crash
Making a million from FTSE 100 shares becomes harder the older you get. You can still do it, but you’ll have to invest larger sums. If starting from scratch at age 35, you would have to increase your monthly contribution to around £1,000 a month.
You can make your money work harder by picking up top FTSE 100 stocks at today’s reduced prices. Prioritise companies with steady revenues, loyal customers, and healthy balance sheets. FTSE 100 giants, such as spirits-maker Diageo, information specialist Experian, mining company Rio Tinto, and household goods firm Unilever have all caught my eye in recent weeks.
Today’s stock market may be highly volatile, but investing a regular monthly sum should smooth out the peaks and troughs. Even if you don’t make a round million, you can look forward to a much wealthier retirement if you start investing now.