According to The National Lottery website, there’s a just over one in 45 million chance of getting six numbers correct and winning the Lotto jackpot. In other words, when I buy a ticket and choose my numbers, my chance of winning a life-changing sum of money is vanishingly small.
Meanwhile, in February 2011, the price of one Bitcoin stood near 75p. Today, almost 10 years later, the price is just above £14,250. So, if I’d invested £1,000 in Bitcoin 10 years ago, the face value of my hoard would be an eye-popping £19m or so now. However, selling would probably be quite tricky and would attract transaction costs and taxes.
How I’d invest to get rich
I didn’t put £1,000 into Bitcoin in 2011 because at the time it looked like a risky option to me. But what about investing now? To get a similar return from a £1,000 investment over the next 10 years, Bitcoin would have to rise to a price of around £270m per coin. And I think that looks unlikely.
Although several people claim to be Bitcoin millionaires, I wouldn’t rely on Bitcoin to make me wealthy now. And I don’t fancy my chances of winning the National Lottery. Instead, I’m using a time-tested way to get rich by investing in shares and share-backed investments such as trackers and managed funds. And I only need to look at the 1,000 or so ISA millionaires in the UK to see what’s possible.
I reckon investing within a tax-efficient wrapper such as a Stocks and Shares ISA is a good idea. Back in 2003, Lord John Lee emerged publicly as the UK’s first known ISA millionaire. By investing money into ISAs and the Personal Equity Plans that existed before ISAs, he contributed around £150,000 over the years. But now his investment pot is worth “several million”.
Compounding steady gains
He achieved those gains by researching and buying shares in generally smaller companies. Then he stuck with those holdings, allowing the underlying businesses to grow. And over the years he re-invested his returns to compound his gains. The process of compounding gains from long-term share investments drove his portfolio from a few thousand into millions. For most successful investors, I reckon compounding gains is the secret of their success.
Indeed, Lord Lee didn’t have to gamble with impossible odds by betting on the Lottery. And he didn’t have to flirt with risky vehicles such as Bitcoin. Instead, he rolled up his sleeves, worked hard at his investment strategy and made a long series of incremental gains over a lengthy period of time.
When I look at the record of any well-known successful investor, the story is often similar. I’m thinking of people such as Warren Buffett, Peter Lynch, Nick Train and many others. And that’s why I’m forgetting about The National Lottery and Bitcoin, and concentrating on executing my investments in shares.