How to aim to become a millionaire by investing £250 a week in FTSE shares

Einstein once said that compound interest is the eighth wonder of the world. I’m looking at how investing in FTSE shares could make me a millionaire!

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.

man in shirt using computer and smiling while working in the office

Image source: Getty Images

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.

Compounding really is a magic phenomenon. And I’m calculating what regularly investing small amounts in FTSE shares could mean for me in 20 or 30 years’ time.

I’ve always liked dividend shares for my portfolio. And I think targeting those with the highest yield could make me a million!

Dividend shares

The average yield in the FTSE 100 is currently sitting between 3% and 4%. This is not to be sniffed at. It’s well in excess of the Bank of England base rate, so represents a good place to put my spare cash.

However, some of the higher dividend payers in the FTSE 100 are offering well above the average. At the time of writing, some of the top dividend payers are Persimmon (16% dividend yield), Rio Tinto (11%) and Abrdn (10%).

The FTSE 250 also has several companies offering a dividend yield above 10%.

Now, of course, there is more to an investment than dividend yield alone. And these yields will change over time. But this information shows me the potential returns if I reinvested those dividend payments.

And if I add into the mix a steady regular £250 per week investment, the exponential curve could be very steep!

How long will it take to get to £1m?

This approach may never take my portfolio value to a million, but with some simple maths, I can make an estimate.

If I start today with nothing, and purchase £250 per week of FTSE shares averaging a 10% dividend yield, my portfolio would reach £1m in year 22. And at this point, I’d only have put in £286k from my regular weekly payments!

When I compare this to investing in average-yielding FTSE shares, say 4%, it would take me 36 years, and I’d have put in almost half of the £1m myself!

For both scenarios, I’m assuming I receive all the dividend income at the end of the year and re-invest it immediately.

Other factors

It’s important to consider other factors that could impact this plan.

The companies that I invest in to yield 10% dividend return will change in value as the share price rises and falls. They could reduce in value, meaning it would take longer to reach my £1m goal. Or increase in value, meaning I reach my goal quicker.

There is also a risk that the companies I invest in don’t pay dividends at 10% yield for each of the next 20 or so years. Again, the impact of this if the yield is reduced would be that my goal is reached later.

I might also be able to find companies offering above 10% yield outside of the FTSE indices. But for me this comes with too much risk. So I’ll be sticking to large, proven businesses listed in the UK.

With interest rates still low, I think high dividend FTSE shares are a great way of trying to grow my portfolio to a million!

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.

James Yianni has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Concept of two young professional men looking at a screen in a technological data centre
Investing Articles

After crashing 50%, is now the perfect time to buy this world-class FTSE 250 share?

The worst-performing share on the FTSE 250 over the last year is also the most exciting one of all. How…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: July’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

Is this one of the FTSE 100’s best-value growth shares?

Looking for great-value recovery shares to buy today? Based on City forecasts, this could be one of the best that…

Read more »

Investing Articles

Will the Tesco share price hit a 10-year high in 2024?

Up from 200p less than two years ago, the Tesco share price has enjoyed impressive growth lately. Now I'm considering…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

Nearing its 12-year low, this FTSE growth stock could be the bargain of the year!

Harvey Jones has happy memories of owning this FTSE 100 growth stock. Now he's wondering whether to take a trip…

Read more »

Investing Articles

BT share price: a bargain or one to avoid?

This Fool has been keeping tabs on the BT share price. Despite looking cheap, he's steering clear of the stock…

Read more »

Electric cars charging in station
Investing Articles

Where will Tesla stock be in 5 years? Here’s what the experts say

The analysts' outlook for Tesla stock in the next few years seems to be all over the place, as the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

3 reasons why I predict UK shares will soar over the next 12 months!

Our writer believes there are plenty of reasons why UK shares will do well over the next year or so.…

Read more »