3 mistakes to avoid if you want to make a million

Three tips to help you build that million pound fortune.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Most people would love to be a millionaire. However for many, reaching this goal seems like an unachievable task. But it doesn’t have to be.

Getting to the magical £1m figure isn’t as difficult as many believe it to be. In fact, to become a millionaire all you need is a regular savings plan and time. There’s really not much else to it.

Unfortunately, most people struggle to build a small savings pot for a rainy day, let alone save £1m. Savers struggle because they break the three key golden rules of saving. These three simple rules are easy to follow, but if you deviate from them you can quickly jeopardise your long-term savings goals.

The mistakes to avoid 

The first mistake to avoid making if you are trying to build a million-pound fortune is seeking to get rich quick. 

Warren Buffett, who’s considered to be the world’s greatest investor, believes the first rule of wealth creation is to make sure you don’t lose money. More often than not, get-rich-quick schemes will end up costing you money. In most cases, the returns these schemes offer don’t adequately compensate you for the risk taken on. What’s more, by putting all of your eggs in one basket you’re severely limiting your options. 

This rule applies to stocks as well. There’s no easy way to make money in the stock market. Successful professional investing takes years of experience to learn and even then you can still make mistakes. Putting 100% of your investment portfolio into an AIM stock, which has been touted as being the next Apple will almost certainly end in tears. 

If you’re going to dive in, at least choose a basket of 30 stocks or more so you’re well diversified.

Dipping into your savings 

The second mistake to avoid is dipping into your savings. A regular savings plan can really pay off over time, but all your hard work can be undone in an instant if you dip into your pot to splurge on one big purchase. 

If you’re the type of person who struggles to save, it may be wise to open several savings accounts. With multiple accounts, you can prioritise those holding long-term savings and those holding money for that special one-off purchase or unforeseen expense. Hopefully, this will improve your relationship with your money.

You’re not better than everyone else

The third mistake wannabe millionaires make is thinking that they’re better than everyone else. 

Multi-billionaire famous investors such as Warren Buffett are one-of-a-kind, and most people don’t have what it takes to be able to beat the market consecutively or to start the next Facebook

The best way to grow your wealth is to think ‘boring but predictable’. A regular savings plan or investment in the stock market via an index tracker will generate steady returns over time while protecting your hard earned savings. With the market doing the hard work for you, all you need to do is concentrate on putting the money away.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Apple and Facebook. The Motley Fool has the following options: long January 2018 $90 calls on Apple and short January 2018 $95 calls on Apple. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Start supercharging passive income with REITs!

Are REITs the ultimate investment for boosting income generated from a portfolio? Zaven Boyrazian explores some of the most lucrative…

Read more »

Investing Articles

Should I buy more Rolls-Royce shares near 500p?

This investor is wondering whether to buy more Rolls-Royce shares this summer or to just stick with those he already…

Read more »

Investing Articles

After its big fall, is the National Grid share price dirt cheap now?

The National Grid share price fell sharply in reponse to new rights issue plans. But is it an even better…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Starting in June, I’d invest £1,000 a month to aim for a £102,000 second income in retirement

This author highlights a less well-known FTSE 100 stock that could help his portfolio generate a very big second income…

Read more »

Investing Articles

Down 47% in 5 years, is the IAG share price due a bounce?

Many companies in the travel sector have seen fierce rallies since 2020. But with the IAG share price still down…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Despite its drop, I reckon this is one of the best FTSE 100 stocks to buy and hold!

The FTSE 100 has been climbing in 2024 but this favourite of our writer's has been falling. Despite this, she’s…

Read more »

Investing Articles

AI stocks vs EV shares; which is the best sector for me to invest in?

Jon Smith considers the recent rally in AI stocks and weighs up whether to allocate more money there versus EV…

Read more »

A graph made of neon tubes in a room
Investing Articles

Do Greggs shares have even more growth ahead?

Greggs shares have seen some solid growth in the last few months, as the economy shows positive signs. But is…

Read more »