How I’d aim for a £1m Stocks & Shares ISA starting with just £150

Jon Smith outlines how it’s possible for him to become a Stocks and Shares ISA millionaire from regular weekly investing over time.

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.

Middle-aged Caucasian woman deep in thought while looking out of the window

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.

The benefits of me using a Stocks and Shares ISA now are just as high as they were a decade ago. It allows me to shelter the stocks I own from tax implications. This includes capital gains tax and dividend tax. When I’m trying to build a portfolio worth £1m, the advantages with the ISA can really help to speed up reaching my goal. If I had to start today with just £150, here’s how I’d go about it.

My investing strategy

I’m going to assume that I have a regular stable income that allows me to allocate £150 a week to investments. Month one is the current point I’m at, with four weeks of accumulated income (£600) ready to go.

Putting away some money each week gives me a huge amount of flexibility to take advantage of whatever opportunities the market has at that time. However, if I miss a few weeks for whatever reason, I’ll also be able to simply top up holdings in any of my favourite stocks that I believe in for the long term.

Therefore, my investing strategy would look something like this. One week I note that a poor trading update has pushed down a growth stock by 10%. However, I’m optimistic about the outlook for the business, so I snap up some shares.

Another week, I don’t have time to go through the market in detail. On this occasion, I decide to buy more shares in the company. This allows me to average-in my buying price. If I buy the stock on a handful of occasions, it’ll give me a much smoother average price, rather than committing everything in one go.

Letting time do the work

Following this strategy over time is the key to enabling my ISA to grow in value. As years go by, I’d hope that the stocks I own appreciate in value. The gains year-on-year can compound, growing my pot even quicker.

When I decide to sell a share, I also benefit from not having to pay tax on the profits. This allows me to use the full amount to reinvest into a different company and not lose anything to the taxman. Again, this helps to increase the value of my ISA.

With my monthly £600, I’m going to assume an average annual growth rate of 8%. This might seem generous, but if I tilt my ISA towards growth stocks and high-yield income payers, it’s not unrealistic. With this forecast, I’d potentially reach £1m in just over three decades.

Factors to remember

Three decades might seem a long time, and it is. However, there are so many factors that could speed this up (or slow it down).

If the market goes through a prolonged crash with a deep economic recession, this could slow down the progress of my ISA. My average annual growth rate would drop or could even go into reverse.

On the other hand, I’d expect to earn a lot more money years down the line. So I could increase £600 a month to £1,000 a month or even more. This would dramatically cut down the time down.

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.

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.

Jon Smith and The Motley Fool UK have 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

Investing Articles

Penny stocks to consider buying while their prices are this cheap

Some of the penny stocks I've been watching have already climbed above the 100p level. But I see potential in…

Read more »

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

Revealed! One of the hottest growth, value, and dividend shares to buy today

This high-dividend, low-cost company is also one of the London stock market's most exciting growth shares, writes Royston Wild.

Read more »

Investing Articles

£20,000 in savings? Here’s how I’d target a £2,219 monthly passive income with FTSE 100 shares

Investing in FTSE 100 shares can be a great way to turn a regular investment into a life-changing passive income…

Read more »

Investing Articles

These are the most popular 2024 Stocks and Shares ISA picks so far

After a few tough years, it looks like the 2024 Stocks and Shares ISA season is getting off to a…

Read more »

Investing Articles

This FTSE 100 ETF may be the simplest way to become a stock market millionaire

Ben McPoland considers one very straightforward stock market investing strategy that could lead to a million-pound portfolio.

Read more »

Investing Articles

I’d buy 11,220 Legal & General shares for £200 a month in passive income

Our writer considers how much money investors would have to put into Legal & General (LON:LGEN) shares to target £2,400…

Read more »

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

These 2 magnificent FTSE 250 shares are on sale right now!

These FTSE 250 companies still look cheap, despite recent share price gains. Here's why our writer Royston Wild thinks they’re…

Read more »

Blue NIO sports car in Oslo showroom
Growth Shares

Down 36% in 2024, how low could NIO shares go?

The electric vehicle sector has seen some tremendous volatility in recent years, but what does the future hold for NIO…

Read more »