If you don't want to wait 50 years to make a million, you'll need to take a few chances.
I could write this article the usual way -- by showing you how to turn your thousands into millions through investments in solid, well-known companies. I'm thinking of companies like Tesco (LSE: TSCO) and Unilever (LSE: ULVR), both solid long-term performers with seemingly decent futures ahead of them. Not too shabby.
But can such returns turn your thousands into millions? Yes, eventually. An investment of merely £10,000 would turn into £1 million in 30 years if it grew at an annual average of 17%.
But that's a fairly steep rate to count on for your share investments -- a number to which only a select few master investors can aspire. It's safer to have more conservative expectations -- perhaps closer to 10%, the stock market's historical average annual return over most of the past century.
A Fine Balance
So, what should you do if you don't want to wait 50 or more years to make millions? Here's one option: Take a few chances.
With most of your money, you shouldn't take silly risks. Consider stuffing much of it away in an index tracking fund. A low-cost fund should earn you close to the market's historical return over long periods of time. You might also try the iShares FTSE 100 (LSE: ISF), an exchange-traded fund.
Either of these options will instantly invest your money in 100 major British companies, such as HSBC (LSE: HSBA), Vodafone (LSE: VOD), and Legal & General (LSE: LGEN).
But once you've done that, take a few chances and supplement your index with growth shares. That's what I'm doing in my own investment account. I don't want all of my money in an index fund, because I'd like my portfolio to grow faster than average. Instead, a chunk of my nest egg sits in a variety of individual companies.
This strategy should help moderate volatility, and it can also allow you to do well with carefully chosen companies.
Aiming For The Stars
I'm constantly on the lookout for young, dynamic companies that are breaking the rules as they grow and prosper.
The kinds of companies I'm talking about are tomorrow's Domino's Pizza (LSE: DOM), ICAP (LSE: IAP), and Carphone Warehouse (LSE: CPW). Each of those companies has redefined themselves with innovative products and services.
Domino's Pizza has brought great late-night service to millions of people who've overindulged on alcohol. ICAP has redefined the world of interdealer broking, making it easier, convenient and cheaper for intermediaries to trade over-the-counter financial products. Carphone Warehouse was the first true mobile phone comparison service. The name of the company giver you an indication as to how long those guys have been around.
Even British Sky Broadcasting (LSE: BSY) was a rule breaking company once, too, bringing satellite television to the masses at an affordable price. Just try to imagine a world without 10 movie, 4 children, 8 news and 7 sports channels.
Find A Few Rockets
Seeking out and investing in rule breaking companies requires patience and entails risk. However, just one growth rocket has the potential to supercharge an otherwise stodgy index strategy.
If you're interested in adding some turbo-boosters to your own portfolio, consider our Motley Fool's Champion Shares premium stock picking service. Although Chief Analyst Maynard Paton tends to stick to recommending quality companies trading at cheap prices, he is partial to the odd high-flying rule breaker. You can try Champion Shares free for 30 days, including instant access to all current recommendations. Click here to find out more.
More on the economy and the markets:
> If you're in the market for buying and selling shares, consider opening an online broker account with The Motley Fool's Share Dealing Service. You can buy and sell shares in real time for a flat rate of just £10. Click here to find out how you can open an account for free today. There is no obligation to trade.
> This article was first published on Fool.com and was first published on Fool.co.uk on 19 May 2009. It has been updated by Bruce Jackson, who doesn't own shares in any of the companies mentioned in this article.
