I’d invest £10 a day in a Stocks and Shares ISA to try for a million

Investing relatively small, regular sums inside a Stocks and Shares ISA can build up over time to help support a comfortable, tax-free retirement.

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.

A senior group of friends enjoying rowing on the River Derwent

Image source: Getty Images

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.

It’s easy to fritter money away, but I would rather put it to work by investing small, regular sums in a Stocks and Shares ISA. Over time, putting away a pound or two every day can build up into something worth having.

By stretching that to £10 a day, roughly the price of a morning coffee and lunchtime meal deal, I can start to build serious money for retirement.

Stocks and Shares ISA millionaires do exist

Drip-feeding monthly sums into FTSE 100 shares strikes me as an attractive way to build a large pot of personal wealth. If I generate a return roughly in line with the FTSE 100 long-term average of 7% a year, my £10 a day could eventually be worth hundreds of thousands of pounds.

That is all due to the power of compound interest. By re-investing all the dividends I receive straight back into my portfolio, I would turbocharge my total return. If I started young, say age 25, my £10 a day would have grown to £779,675 some 40 years on, when I’d be 65. That money would also be free of all income tax and capital gains tax.

I would have made total contributions of £146,000, while compound interest would have delivered a staggering £633,675 of my ultimate total.

That would leave me short of a million, which is why I would take a second step. I would increase my contribution by 3% every year, to help it keep pace with inflation. If I did that, I would have a portfolio of £1.14m after 40 years.

Now 40 years is a long time. Sadly, I’m much closer to retirement than that. An investor who was 20 years away from hanging up their boots and invested just £10 a day would only build savings of £201,482, assuming the same 7% return. It pays to start early and stick with it.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

With luck, they may have other sources of retirement savings, such as a workplace pension. But late starters will have to work harder if they want to make a million.

That’s easier said than done, especially as money is so tight these days. But one way I would aim to generate a better return is to invest in individual FTSE 100 stocks.

This is riskier than simply purchasing a FTSE 100 tracker, but I would combat that by building a portfolio of around a dozen companies in different sectors and with contrasting risk profiles. That way if one or two disappoint, others will hopefully outperform. 

With luck and careful research I would hope to generate a return of more than 7% a year, but as ever with investing, there are no guarantees. If I managed to up my average annual return to 10%, my £10 a day would turn into £1 million in 32 years, instead of 40. Again, this assumes I increase my contribution by 3% a year.

The truth is that most of us will not become a Stocks and Shares ISA millionaire. Yet that’s only a dream target figure. Even if I generated, say, half that amount, I could still look forward to a more comfortable retirement than if I had never tried.

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.

Harvey Jones doesn't hold any of the shares mentioned in this article. 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

Mixed-race female couple enjoying themselves on a walk
Investing Articles

A once-in-a-decade chance to get rich buying growth stocks?

We haven't seen a good spell for growth stocks for quite a few years now. But I reckon the signs…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

The FTSE 100 is full of bargains! Here’s 1 stock I’m eyeing up

A weak economic outlook has hurt the FTSE 100. This Fool explains why she likes the look of this consumer…

Read more »

Investing Articles

2 no-brainer beginner FTSE 100 stocks to buy for my portfolio

Getting started with investing can be daunting. Here are two stocks for beginners to consider buying to build their first…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 recession-resistant UK shares investors should consider buying

Our writer details two UK shares she feels could withstand some of the ill-effects of the current malaise to provide…

Read more »

Tanker coming in to dock in calm waters and a clear sunset
Investing Articles

Glencore share price drops on results. Time to buy?

The Glencore share price wobbled a bit after a weak set of 2023 results. Here's why I have the stock…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Big trouble in China sinks HSBC shares. Should I invest after record FY results?

HSBC shares have slumped following a disappointing end to 2023 for the FTSE stock. Royston Wild explains why this may…

Read more »

View of Tower Bridge in Autumn
Investing Articles

3 dirt cheap FTSE 100 shares to snap up today?

The FTSE 100 is rallying, but many shares still look super cheap on fundamentals. Is our writer buying these three…

Read more »

Black woman using loudspeaker to be heard
Investing Articles

FTSE 100 earnings: what can we expect from Rolls-Royce in 2024?

The Rolls-Royce share price tripled in 2023. Roland Head wonders whether this FTSE 100 stock could continue that impressive trajectory…

Read more »