The idea of becoming a millionaire has appeal – but is it practical? I think one way I can aim for a million in the coming years and decades is by drip-feeding money into the stock market and building up a shares portfolio.
Here is how I could aim to do that starting in 2023, for £10 a day.
Start saving regularly
Putting aside £10 a day, the money can soon start adding up. By the end of 2023, I would already have saved over £3,600 I could invest. That is quite a sizeable investment pot.
This shows the power of regular saving, but I think doing so is easier with a disciplined habit. So I would aim to save the same amount on a regular basis.
I would do that according to my own financial situation. I think I could afford £10 a day even when other spending priorities pop up. Being realistic about saving goals is important because if I set an overly ambitious target and consistently fail to meet it, my plan may well fall apart.
I would save the money in a share-dealing account or Stocks and Shares ISA. That way, when I have enough money and identify shares to buy, I will be immediately ready for action.
Go for growth
But while an annual £3,650 is a decent sum of money it is still a long way off my goal. How can it help me aim for a million?
I would do that by using the money to invest in shares I expected to produce portfolio growth over time. These could be growth shares like Alphabet, where I hope the share price may increase. Or they might be income shares like Direct Line which, hopefully, could pay me chunky dividends for owning them.
I would likely buy both types of shares, although would focus more on income shares. Rather than taking the dividends as cash, to help me as I aim for a million I would reinvest them in more shares. This is known as compounding.
Reaching my target
This plan could work, in my opinion – but I need to be patient. I could start buying shares in 2023 but would need to carry on doing so for many years, still putting aside £10 a day.
As an example, imagine I managed to earn a compound annual growth rate of 12% while continuing to put aside that tenner a day. After 30 years, I would have hit my goal to aim for a million.
I know 12% is an ambitious target and I have to accept that I might not reach it. I might also lose money. But I think it is still an achievable goal. By investing in a selection of well-known blue-chip shares and looking for portfolio growth both from higher share prices and dividend reinvestment, I think the target could well be within my grasp.
I could start now, setting up a regular savings plan in 2023 and hunting for the right sorts of shares to buy.
