We all dream of putting our money worries behind us and achieving millionaire status and there are many stories of ISA millionaires. But is it possible for ‘ordinary’ people to become millionaires? Indeed, it is, and many everyday investors have done just that. By investing regular sums in a Stocks and Shares ISA, and using it to purchase a selection of securities, shareholders have made fortunes.
Begin your ISA millionaire journey
This distant dream of becoming an ISA millionaire is not only possible, but an enjoyable and educational journey too. The reason I say educational is that you can learn a lot about the world by becoming an investor, and who does not enjoy making money?
Now may be the perfect time to begin stock market investing. The turbulent economic times we find ourselves in are providing a good backdrop for building a substantial nest egg. Earning compound interest on your monthly sum multiplies its value exponentially. For example, a monthly investment of £500, over a 40-year period at an effective annual rate of 6.17% could lead to a final investment value of £1,000,724.
By investing £500 a month, you are giving yourself a significant advantage in advancing your future prosperity.
The Bank of England interest rate is exceptionally low just now, which means a Stocks and Shares ISA provides better scope for higher rates of return than traditional savings accounts. Some UK companies offer dividend yields as high as 10%, but the safer companies offer a rate of around 4%. Carefully choosing a mixture of these, could easily return an annual rate of 6.17% and help you become an ISA millionaire.
Obtaining a consistent rate of return is unlikely but, over a long duration, market fluctuations are par for the course. Over four decades, you are likely to see the full spectrum of the market’s peaks and troughs. This can be off-putting for individuals looking to invest in a short time frame. But when time is on your side and you can buy and forget, the stress becomes negligible. A calm, practical approach to long-term investing is one that helps build fortunes without fuss.
Invest like Warren Buffett
Warren Buffett and his colleague Charlie Munger are two successful billionaire investors who consider the bigger picture when investing. They also take a lifelong approach to their wealth generation process, and their method could help you become an ISA millionaire.
Warren Buffett’s strategy begins with seeking intrinsic value, which means finding a solid company that has been temporarily undervalued by circumstances beyond its control. Today, the FTSE 350 in a bear market offers untapped growth potential with well-established companies trading at reduced prices due to the impact of Covid-19.
Do your research and you will find some great earners to boost your portfolio in the years to come. The FTSE 100 features some quality businesses, many with a global presence, that can offer you a relatively safe return on your capital and dividends. Meanwhile, the FTSE 250 features many UK-centric businesses with prime growth prospects.
Start putting money in your Stocks and Shares ISA today and reach for the freedom of future riches. If you are in your 20s, it is possible to become an ISA millionaire by the time you are ready to retire.
The post Invest your way to becoming a Stocks and Shares ISA millionaire with £500 a month appeared first on The Motley Fool UK.
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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