The idea of becoming a millionaire has appeal – but is it practical? I think one way I can aim for a million in the coming years and decades is by drip-feeding money into the stock market and building up a shares portfolio.
Here is how I could aim to do that starting in 2023, for £10 a day.
Start saving regularly
Putting aside £10 a day, the money can soon start adding up. By the end of 2023, I would already have saved over £3,600 I could invest. That is quite a sizeable investment pot.
This shows the power of regular saving, but I think doing so is easier with a disciplined habit. So I would aim to save the same amount on a regular basis.
I would do that according to my own financial situation. I think I could afford £10 a day even when other spending priorities pop up. Being realistic about saving goals is important because if I set an overly ambitious target and consistently fail to meet it, my plan may well fall apart.
I would save the money in a share-dealing account or Stocks and Shares ISA. That way, when I have enough money and identify shares to buy, I will be immediately ready for action.
Go for growth
But while an annual £3,650 is a decent sum of money it is still a long way off my goal. How can it help me aim for a million?
I would do that by using the money to invest in shares I expected to produce portfolio growth over time. These could be growth shares like Alphabet, where I hope the share price may increase. Or they might be income shares like Direct Line which, hopefully, could pay me chunky dividends for owning them.
I would likely buy both types of shares, although would focus more on income shares. Rather than taking the dividends as cash, to help me as I aim for a million I would reinvest them in more shares. This is known as compounding.
Reaching my target
This plan could work, in my opinion – but I need to be patient. I could start buying shares in 2023 but would need to carry on doing so for many years, still putting aside £10 a day.
As an example, imagine I managed to earn a compound annual growth rate of 12% while continuing to put aside that tenner a day. After 30 years, I would have hit my goal to aim for a million.
I know 12% is an ambitious target and I have to accept that I might not reach it. I might also lose money. But I think it is still an achievable goal. By investing in a selection of well-known blue-chip shares and looking for portfolio growth both from higher share prices and dividend reinvestment, I think the target could well be within my grasp.
I could start now, setting up a regular savings plan in 2023 and hunting for the right sorts of shares to buy.
The post I’d aim for a million spending £10 a day on shares — starting in 2023 appeared first on The Motley Fool UK.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Alphabet. 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 2022