The chance of winning the UK National Lottery is 1 in over 45m. The chance of getting five numbers and the bonus ball in order to win £1m is 1 in over 7.5m. As such, it’s obvious that almost all of us will fail to become millionaires through buying National Lottery tickets.
While that’s disappointing, at least there may be another way of making a million, and where the odds are considerably more favourable. Furthermore, it’s accessible to all, and may prove to be far simpler than many people believe. It’s called the stock market.
Buying and selling
The idea of investing a portion of income in the stock market may sound unappealing to some people. They may be of the view that doing so is complicated, costly, or takes up a lot of their time. However, with the growth in online sharedealing, this is no longer the case. It’s now possible to open an online account in less than 10 minutes, while it takes just a few mouse clicks to buy and sell shares in a variety of well-known companies. Furthermore, the cost of doing has fallen in recent years, which means that investing is more accessible to a variety of investors.
Return potential
While there may not be a ‘jackpot’ every Tuesday, Wednesday, Friday and Saturday evening when it comes to investing in the stock market, over the long run it could make an individual a millionaire. It has a track record of growth, as well as offering high dividend returns, in some cases. With regular investment over a number of years, it may be possible for even modest amounts of capital to grow into large nest eggs.
For example, the FTSE 250 has delivered a total return per year of 9.5% over the last two decades. An investment of £1,000 made in early 1999 would therefore be worth over £6,000 today. Investing a larger amount, or consistently apportioning capital to the stock market, over a longer time period could lead to even higher returns. Indeed, investing £5 per day over a working life would generate a total portfolio value of over £1m by retirement, if its returns match those of the FTSE 250 over the last 20 years.
Risks
Clearly, there is a risk of loss from buying and selling shares. It’s possible for an investor to lose their entire portfolio value should all of their holdings go bust. However, by spreading the risk among a variety of shares, it’s possible to reduce company-specific risk. And by focusing on companies with strong balance sheets and track records of growth, it may be possible to reduce risks yet further.
While the National Lottery is a fun way of trying to make a million, the stock market offers better odds and a strong track record of turning modest amounts of money into sizeable nest eggs over the long run. Since it’s becoming increasingly accessible, it could be worth a closer look.
