I’d aim for a million buying blue-chip shares

If I focus on investments to help me in my aim for a million-pound nest egg, I think buying blue-chip shares is an excellent strategy.

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I’m aiming for a million from my investments. If I could hit that figure in my accounts, it would mean financial security, a larger amount to pass on to kids or grandkids, and a regular income when I start to withdraw it.

The data show that thousands of people in the UK have built up £1,000,000 in ISA accounts. I hope to join them some day. And the key to my strategy is to invest in blue-chip shares.

Why blue-chip shares?

A blue-chip stock refers to the shares of an established, highly-regarded company. In the UK we have a boatload of these companies in the FTSE 100, which consists of the 100 largest public companies on the London Stock Exchange.

The size of such blue-chips means they operate worldwide and in many different areas. This makes them resilient to issue slike a downturn in a certain geographic location or market. 

Also, they tend to offer excellent dividend payouts to shareholders. So if I own a blue-chip stock, I’d get regular payments back from the company. And dividends can keep my account ticking higher even in tough times. 

Which of these shares do I like? Well, next time I have some free cash, I plan to open a position in both financial services provider Legal & General and mining corporation Rio Tinto. Those are both British multibillion pound corporations that offer weighty dividends.

Other such companies that are on my watchlist are supermarket chain Sainsbury’s, drugmaker GSK and energy infrastructure company National Grid

Choosing the right companies is vital if I want to get to a million, so research would be important here. 

How long before I get to a million?

If I invested in companies on the FTSE 100, I could plan for an 8% return on my holdings each year. That’s the average historical return. But I’ll go a little lower to give myself a buffer. A 7% return seems reasonable (although I know I might undershoot that as returns aren’t guaranteed). 

Here’s what investing £600 a month in those blue-chip shares would look like with a 7% return, if I was starting from scratch. I’d hit the million mark after 35 years.

20 years25 years30 years35 years40 years
£600 a month£304,522£469,825£701,672£1,026,848£1,482,925

I could bring the number of years down with more savings or better returns from the stocks I invest in. But of course, it could take a lot longer if I invest poorly or had periods where I couldn’t save. 

Investing now rather than later is critical

One of the truths of investing that almost everyone agrees with is that ‘time in the market beats timing the market’. This means that rather than trying to predict the daily ups and downs of the stock market, it’s best to invest for long periods of time. 

So what does that mean for me? Well, if I want to get to a million or more from my investments, I need to start as soon as possible. The earlier I invest, the more time my money has to mushroom into an impressive amount.

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.

John Fieldsend has no position in any of the shares mentioned. The Motley Fool UK has recommended GSK and J Sainsbury Plc. 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.

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