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How I’d invest £500 a month in a Stocks and Shares ISA to aim for a million

Happy retired couple on a yacht
Happy retired couple on a yacht

Trying to become a stock market millionaire doesn’t have to be a pipe dream. It takes dedication, patience and possibly even a little luck. But the soaring number of Stocks and Shares ISA millionaires shows that it is a realistic goal to aim for.

A freedom of information request to HMRC earlier this year showed there are more than 2,000 ISA millionaires in the UK. The average pot for these investors stood above a whopping £1.4m too.

Pot size

Number of investors

Average pot value

£1m to £1,999,999

1,870

£1,227,000

£2m to £2,999,999

80

£2,366,000

£3m+

60

£6,199,000

Here’s how I’m aiming to become an ISA millionaire.

Reducing risk

It might sound obvious. But (by and large) the most successful investors take a dim view of taking on too much risk.

For example, packing an ISA with new, high-growth stocks to fast-track wealth can be highly dangerous. Shares like these often have plenty of promise. But they also tend to have weaker balance sheets than larger, established businesses.

This means they might not have enough financial firepower to make good on their potential. It also puts them in greater jeopardy of failing, due to both internal and external reasons (from product failure or a misfiring marketing policy, for example, to a meltdown in the broader economy).

Following Warren Buffett

Reducing risk obviously cuts the chances an investor has of making a loss. And making sure you can avoid losses is the most important thing, according to legendary investor Warren Buffett. And he’s amassed a personal fortune north of $100bn.

Creating a well-diversified portfolio is also an essential step in reducing investment risk. I count drinks business Diageo, miner Rio Tinto and financial services business Prudential among my holdings. This helps gives me exposure to a variety of different industries and locations.

A quote from billionaire investor Warren Buffett
Image source: Microsoft

Buffett has also built his wealth by owning a range of blue-chip businesses. The biggest holdings at his Berkshire Hathaway investment firm include tech giant Apple, Bank of America, Coca-Cola and oil major Chevron.

What I’m doing

Within my portfolio, I’ve concentrated on buying a wide mix of well-established FTSE 100 and FTSE 250 shares. Even if I don’t hit my magic million target, I’m sure this strategy will still make me above-average returns.

Long-term investors tend to enjoy an average yearly return of 8-10%. But I’m confident I could make a figure of at least 12%. Buying beaten-down value stocks (another of Buffett’s tactics) following stock market volatility is another decision I’ve taken to help me strike it rich.

And doing this regularly could put me on the path to long-term wealth. Let’s assume I invest £500 a month in my Stocks and Shares ISA and manage to hit that 12% figure. That means I will have become an ISA millionaire after just 27 years.

Share investing can be a bumpy ride. But with a patient approach and regular commitment, it really is possible to make a million.

The post How I’d invest £500 a month in a Stocks and Shares ISA to aim for a million appeared first on The Motley Fool UK.

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Bank of America is an advertising partner of The Ascent, a Motley Fool company. Royston Wild has positions in Diageo, Prudential, and Rio Tinto. The Motley Fool UK has recommended Apple, Diageo, and Prudential. 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