There’s an irony to getting older. When I was young, I wanted to get rich quick with small-cap growth shares. But now I’m trying to get rich slowly with FTSE 100 stocks.
The later that change hits us, the less time we have to do it in. But I say it’s never too late.
It depends what we mean by rich, too. For me, it doesn’t mean making millions. It just means having enough to live a comfortable life when I retire.
State Pension, oh dear
The State Pension doesn’t come close, especially not as the qualifying age keeps being pushed back. Between 2044 and 2046, it’s set to reach 68 years of age.
What can we do about it? Well, I put regular cash away into my ISA. And I don’t mean a Cash ISA.
In the long term, Cash ISA returns have been pitiful. So it’s a Stocks and Shares ISA for me.
Regular long-term investing
I save what I can each month, and buy shares when I have enough. But how do I check share prices and pick the best time to get in?
To answer that, I turn to ace investor Warren Buffett, CEO and Chairman of Berkshire Hathaway.
Since he took over in 1965, he’s achieved an average return of a stunning 20% per year.
That could turn £250 per month into more than £600,000 in 20 years.
Market timing
He must be great at market timing and getting in at the bottom, right? Well, no, he doesn’t even try.
Buffett once said, “It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price“. So he’s not letting ideas of getting in on the cheap distract him from top quality stocks.
He’s emphasised that, saying, “If we’re right about a business, if we think a business is attractive, it would be very foolish for us to not take action on that because we thought something about what the market was going to do“.
Realistic aims
I don’t expect to match Warren Buffett’s returns, or come close to 20% per year. But I sure can still learn from him.
Over the long term, the UK stock market has returned around 8% per year on average, including dividends and share price growth.
At that rate, £250 per month in UK shares could turn into £140,000. And some FTSE 100 dividend stocks have achieved better returns than that
It’s not the half million plus that Buffett-style returns might get me. But I’d be happy to add that kind of money to my retirement pot.
Retirement income
It could be enough to get me an extra annual income of £11,200, if that 8% annual return holds up.
Now, these aren’t predictions. And I can’t say what the FTSE 100 might do in the next few decades. But it’s just an illustration of the kind of thing that might be possible.
So, for me, I think regular investing in FTSE 100 stocks for the long term is the best chance I have to boost my retirement wealth.
