FOOL'S EYE VIEW
Six Ways To Make A Million

By Cliff D'Arcy
February 23, 2005

Hands up who wants to be a millionaire?

By the way, when I talk about millionaires, I mean people whose net household wealth (including property, savings, investments and other assets, minus mortgages and other debts) is £1,000,000 or more. I don't mean the absurd examples given in dodgy property seminars, which boast of how one joker "became a property millionaire in just three months". This person isn't a millionaire, s/he's someone with £1m of property and, say, £900,000+ of mortgages. Trust me, these "get rich quick" ads are pure bull, guff and hogwash!

I know that a fair number of the Fool audience are already members of this select club - and they'll tell you that being a millionaire isn't what it used to be. Indeed, thanks to rising house prices, there are currently about 425,000 millionaires in the UK.

Looking back to before the Second World War, millionaires were few and far between - and having a few million made you a serious tycoon. These days, thanks to inflation (rising prices), a million buys you far less than it used to. And, of course, having a million thirty years from now won't be a big deal at all.

That's why I've set my sights a little higher: I want to have net wealth of between five and ten million pounds before I kick the bucket, and ideally, before my 65th birthday. What's more, I think it can be done. Here are six very different paths to wealth - can you guess which route I'm taking?

1. Premium Bonds

"Depend on the rabbit's foot if you will, but remember it didn't work for the rabbit." (R E Shay, author)

ERNIE, the computer that randomly picks winning Premium Bond numbers, awards a single million-pound prize every month. So, over the next, say, forty years, he'll make 480 people very happy indeed (assuming National Savings & Investments sticks with the current prize-draw structure).

However, ERNIE has over 25 billion numbers to choose from, and around 23 million people own Premium Bonds. In other words, 99.998% of Premium Bond holders won't win a million between now and 2045 - but they won't lose their stake either, which is far better than most games of chance!

2. The National Lottery

"In every bet, there is a fool and a thief." (Anonymous)

Can I be blunt? I can? Okay, then I think the Lotto is for suckers!

As I explained in this article, the odds of winning the Jackpot are almost fourteen million to one. If you buy a Lotto ticket on a Monday, you are more likely to die before the Saturday draw than you are to win the big prize. What's more, only 1 in 54 tickets are winners, and most players will lose more than three-quarters of the money that they splurge on tickets.

However, Lotto draws create around 150 millionaires a year, so Camelot and its successors will create roughly 6,000 millionares over the next forty years. However, up to 35 million people play the Lottery each week, so the odds are still massively stacked against you winning The Big One!

Oh, and by the way, with odds of over 76 million to one, the Jackpot on the EuroMillions lottery is an even bigger pipe dream, so forget it!

3. "Who Wants To Be A Millionaire?"

"You can take it as understood,
That your luck changes only if it's good." (Ogden Nash, comic poet)

I know someone who's sat in the hot seat opposite Chris Tarrant. This chap was a quiz-show fanatic who had won a national quiz competition when he was a child. He came up with the optimal strategy to win the million and started calling the WWTBAM entry line, which costs £1 per call.

Over a period of several months, this man spent around £250 answering entry questions. On three occasions, he was one of the lucky hundred people who were called back to answer a tiebreak question. At the third attempt, he finally won one of ten places on a show, and appeared on a "Couples" episode that was broadcast on 12 December 2001.

He achieved one of the quickest "Fastest Finger" times ever recorded and confidently took his place in the hot seat. The first seven questions were a breeze, with our man even making jokes at Chris Tarrant's expense. However, a slightly obscure geography question cost him all three lifelines and left him flustered. Despite knowing the answer to the next question, he panicked and got it wrong. Dream over!

Having arrived aiming to leave with not less than a million, this shocked contestant left with just £1,000. I know how truly terrible he still feels about that day, because I am him. Now I don't want to talk about it any more - and that's my "FINAL ANSWER"!

4. Save

"Saving is a fine thing. Especially when your parents have done it for you." (Sir Winston Churchill, statesman)

Amassing cash is a surefire - but incredibly slow and dull - way to make a million, assuming that your bank doesn't go bust. (No major UK-based bank has gone under for more than a generation, although NatWest allegedly struggled in the market crash of 1973/74.)

If you could earn, say 3% a year after tax from cash on deposit, you'd need to save £1,088 a month for forty years to amass a lump sum worth £1,000,364. Even with an annual after-tax rate of 5%, it would take £672 a month to get to £1,000,315 over forty years. That's far too many sacrifices for much too long, in my opinion! (Try putting your own figures into our Savings Calculator.)

Check out the superior savings accounts in our Savings centre.

5. Become your own boss

"If you want to be wealthy, you must become self-employed."

This advice was allegedly coined by billionaire oilman Jean Paul Getty Sr (1892-1976), who also remarked that the secret to getting rich was, "Rise early, work late, strike oil"!

Running your own business is one of the best ways to become rich. Of the ten people at the top of the Sunday Times Rich List, seven made their fortune from business ventures. These include Roman Abramovich (oil and gas), Philip Green (retailing), Sir Richard Branson (travel, music) and Bernie Ecclestone (Formula One racing).

The truth is that making a success of your own business takes a lot of hard work, commitment and dedication. If you don't want your firm to be one of roughly 30,000 small firms that close down each month, you'll need to master planning, financial management and marketing. On top of all that, you'll need heaps of self-belief - and don't underestimate the value of luck!

Learn more in Give Your Business A Helping Hand and visit our Business centre.

6. Invest

"Although it's easy to forget sometimes, a share is not a lottery ticket ... it's part-ownership of a business." (Peter Lynch, investment guru)

You could try to make money from investing in mainstream assets, such as bonds, property or shares. On the other hand, you could try your hand at buying "alternative" investments, such as antiques, art, books, cars, coins, gemstones, gold, stamps, whisky and wine. However, there are three key problems with alternative investments:

• A lack of liquidity, which means that it can be difficult to sell items when you need to;
• High buying and selling commissions, especially with goods at auction; and
• Expert knowledge is needed to value goods, confirm their provenance (origin) and determine their future worth.

Personally, I stick to investing in shares because, for me, it provides the right balance between risk and reward. Since 1918, the UK stock market has produced an average annual return of 11%, with income reinvested. So, play a long game and you stand to make superior returns, because the market saves its greatest rewards for the most patient investors.

Investing just £179 a month for forty years with an average annual return of 10% would produce a lump sum worth £1,001,435. My wife and I invest several times this much each month, purely so that we can look forward to a secure future and a comfortable retirement. What we lose today, we gain tomorrow - many times over!

Finally, with saving and investing, the earlier that you start, the better. Anyone who saves a tenth of their income throughout their working life will end up rolling in it, as this article confirms!

Check out this cheap, simple, flexible investment. Also, try a free thirty-day subscription to our Value Investor newsletter, where two Foolish stock-picking experts do all the hard work for you!

More: Find a better mortgage and savings account, plus keep your profits from the taxman with an ISA.