Aiming to have a £1m portfolio may not seem like a realistic goal for many investors. However, with the advent of the internet it may now be more possible than ever to achieve it. Here are three reasons why almost any investor can retire on a seven-figure portfolio.
The internet has fundamentally changed the way in which shares are bought and sold. In the past, going through a stockbroker would entail a very different experience than the online sharedealing opportunities of today. In many cases, there were minimum dealing amounts, or commission charges that were so high that it did not make financial sense for smaller investors to get involved.
However, all that has now changed. It is possible for investors to quickly set up a direct debit so that as little as £25 per month is invested in funds or shares of their choice. This may not sound all that significant at first glance, but all investors must start somewhere. And if a high return can be generated on small initial investments from the very start of an individual’s investing career, this could help to deliver a large portfolio in the long run.
In previous decades, finding out information on a company was difficult. It was often out-of-date and usually entailed a trip to a local library. Nowadays, it is simple to find out practically any information on any stock or fund. In fact, there is so much data that investors must now be ruthless in deciding which information they use to make their investment decisions.
One area which has also become simpler is buying and selling funds. Although funds have been around for many years, today their charges are lower, and obtaining information about them is much easier due to changing regulations. With it being possible to invest in a FTSE 100 or FTSE 250 tracker through the click of a mouse, it is simpler than ever to access the high growth rates which the stock market can offer.
Most investors have sufficient time to build a seven-figure portfolio. For example, if an individual starts at age 18 and retires at 68 then they have many decades of compounding to help them generate a large nest egg.
As an example, if they invest £10 per week in the FTSE 250 from age 18 until they are 30, they would have £11,120 by the age of 30. Investing £25 per week from the age of 30 to 40 would mean they have £49,561 in total by the age of 40. Then investing £50 per week from the age of 40 until 68 would mean they have over £1m in their portfolio by the time they retire. These figures assume a 10% total return per year, which is in line with the FTSE 250’s performance over the last 20 years.
While a £1m portfolio may sound impossible to achieve, investing small amounts often can make it possible for almost any investor. With sharedealing services now highly accessible and relatively simple to use, it could be a great time to invest in the stock market.