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Could drip-feeding £500 a month into UK shares really make me a million?

Royston Wild
·3-min read
The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.
The UK national flag in front of Canary Wharf skyscrapers where professionals trade shares for a living.

I think you can forget about Bitcoin, buy-to-let and Cash ISAs. I believe that the best way that I can make my hard-earned money work for me is by investing in my Stocks and Shares ISA. History shows that long-term investors usually make a delicious average yearly return of 8% from UK shares. So why would I want to park my money anywhere else?

These proven rates of return mean that ISA investors like me don’t even have to spend a fortune each month to make mega money with UK shares. If I spend £500 on my ISA each month, I can even realistically expect to become a millionaire. That sort of regular investment would make me a minimum pot of £1.07m after 35 years.

I’ve continued to buy UK shares for my ISA in 2020, despite the murky macroeconomic outlook. It doesn’t matter whether I wish to buy low-risk companies with my capital. There are many top stocks out there that should deliver titanic shareholder returns in the near term and beyond.

Safety first!

UK share prices may have rallied this week. But uncertainties over the effectiveness of Pfizer’s much-celebrated Covid-19 vaccine mean that the global economic outlook remains. Throw ongoing trade wars encompassing the US, Asia and Europe into the mix, along with Brexit uncertainty and a messy US election, and there’s plenty for UK share investors to remain concerned about.

For these reasons I reckon buying into firms with classic defensive operations remains a good idea. This list includes food manufacturers, general insurance providers, beverage makers, and personal and household goods manufacturers.

The bottom lines of such companies remain largely unaffected by broader weakness in regional or global economies. And this exceptional earnings visibility makes them brilliant buys for income investors, I feel. It gives them the stable financial base and the confidence to keep doling out chubby payouts to their shareholders.

A top UK share for BIG dividends

One of these UK shares on my radar today is SSE (LSE: SSE). Electricity demand remains largely robust during economic upturns and downturns, making this FTSE 100 power generator a brilliant buy for these uncertain times. However, I like this particular stock because of its focus on the fast-growing realm of renewable energy sources. According to the International Energy Agency, renewables will surpass coal to become the world’s biggest source of electricity generation by 2025.

As I say, non-cyclical shares are often great buys for dividend chasers because of their profits stability. And SSE is no different in this regard. City analysts expect the business to keep hiking annual dividends all the way through to the next fiscal year (ending March 2022) at least. Consequently, the Footsie firm sports a mighty 6.1% yield for this year and a readout of 6.3% for the next period. I’d happily buy this stress-free share today and hold it for years.

The post Could drip-feeding £500 a month into UK shares really make me a million? appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Motley Fool UK 2020