Today marks the 25th birthday of the National Lottery, yet I can remember the hype around its launch as if it was yesterday.
I remember watching the first ever live Lotto draw on Saturday, 19 November 1994, and the deflated feeling when I didn’t win. Call me a bad loser, but I never bought a ticket again.
What a Lotto effort
There have been more than 2,400 draws since then, and I haven’t participated in any of them. Others have, though, including 5,500 who have been made millionaires.
Who knows, it could have been me if I’d persevered. I doubt it, though, as the odds of winning the jackpot are an incredible 45 million to one. I’m not that lucky, and instead I’ve devoted my energies to a more surefire way of getting a million – by investing in the stock market.
The thing about the stock market is that it will not make you a millionaire overnight. So, no instant glory, I’m afraid.
Don’t let that put you off, because stocks are not a get-rich-quick mechanism, and never have been. What they will do, though, is help you get rich slowly and steadily.
Play the stock market
Arguably, the best way of taking advantage of this is to invest a regular monthly sum, as much as you can afford, really, inside your annual £20,000 Stocks and Shares ISA allowance.
Say you start investing £150 a month from age 25 and your money grows at 7% a year, which is the average historical growth rate of the FTSE 100. By age 67, you will have a pretty impressive £444,198.
You will have paid in a total of £75,600 in that time, while compound interest will have delivered a whopping $368,598 on top of that.
Then let’s say you increase the amount you invest by 6% every year, so you invest £159 in year two, and so on. If you do that, you will have $1,076,099 after 42 years. So there’s your million, right there.
You will have paid in £316,711 but compound interest and growth would have delivered the lion’s share of your total pot, at $759,388.
If you’re 40 or 50 and have little or no savings, then making a million on the stock market will be harder. If you wanted to make a million over 25 years, you would have to invest £1,250 a month, which would give you £1,015,147, again, assuming 7% growth.
Start investing now
As you can see, it pays to start investing early, which is why millennials have the edge when building a pension.
This doesn’t offer the same instant reward as a Lottery victory. You have to make a far bigger effort than simply slapping down your £2 in the local newsagents once a week.
You also have to work out where to invest your money, although a few minutes rooting around this site will throw up plenty of tips – both individual company stocks and collective investment funds.
Luckily, this isn’t either/or. You can buy your Lottery ticket as well. Just make sure you are putting a lot more into the stock market, because that offers the most realistic chance of making that million.
Alternatively, you could spend the next 25 years hoping you are that one in 45 million. How’s that working out for you, so far?
