I’D AIM FOR A MILLION STARTING THIS JUNE BUYING 2 STOCKS!
Is it possible to become a stock market millionaire? The answer is clearly yes as many people do just that. But it is not enough simply to aim for a million. One needs a strategy to try and achieve that target!
That does not necessarily need a lot of money upfront, if one is patient and takes a long-term approach to investing.
Here is how I could set the wheels in motion on such a long-term approach this June, buying just a couple of stocks.
Regular investment habit
Key to my plan would be saving up a pot of money that I could use to purchase shares.
To do that, I would get into a regular habit of contributing a set amount to a share-dealing account or Stocks and Shares ISA. I would need to tailor that amount to my own financial circumstances. I think making a goal realistic is an important element of trying to achieve it.
I would, however, aim to save a chunky sum each month (or week) if possible. Imagine that, in my quest for a million, I aimed to save £250,000 to invest. Putting aside £100 each month, that goal would take over two centuries to reach. Saving £900 per month should see me hit it in just over 23 years.
Investing in shares
But if my goal is to aim for a million, why do I use £250,000 in the example above?
It is only an example – I could have plumped for more or less. The key point is that my approach is about investing, not just saving. Saving the money is only a tool to give me the capital to invest in shares. I could start doing that immediately, investing the money as I save each month.
If I can earn a high enough rate of return on what I invest, I really believe I could build a share portfolio worth a million pounds. If I invest £900 per month with a compound annual growth rate of 10%, for example, I would have a million pound portfolio in less than 24 years.
Is a 10% compound annual growth rate realistic?
I think it is, depending on what shares I choose to buy and the price I pay for them. Of course, my investments could always underperform and I could achieve a much smaller return rate. That said, some shares in my portfolio have a dividend yield close to that already. M&G offers 9.9%, for example.
If I reinvest those dividends as I go (something known as compounding), I could earn more each year from the same shares even if the dividend is flat.
Diversification and quality
Like any share, though, M&G could disappoint me. No dividend is guaranteed to last.
That is why I would diversify across a range of blue-chip shares. But as I want to buy into great performing stocks, I would not start buying into dozens of different companies. To aim for a million, I would aim to build a portfolio concentrated in around five to ten great companies.
I could start that by buying just a couple of shares. I just need to find some I think look promising!
The post I’d aim for a million starting this June buying 2 stocks! appeared first on The Motley Fool UK.
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C Ruane has positions in M&g Plc. The Motley Fool UK has recommended M&g Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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