Becoming a millionaire is not easy when starting with modest means. But it is possible. If I had a £20,000 Stocks and Shares ISA and wanted to aim for a million, here are the moves I would make in 2024 and beyond.
Think about timing
Could 2024 be a good time to buy shares? Or a terrible one? The truth is, nobody knows what will happen to the stock market next year.
But timelines still matter. For me that does not necessarily mean trying to time the stock market and swoop in at a moment when shares offer unusually good value.
Rather, it means I focus on long-term investing rather than the short term. The sooner I start to invest my Stocks and Shares ISA, the longer I have for my investment choices to play out.
Focus on risk, not just reward
If I could increase the value of my investments 50-fold, I would turn a £20k Stocks and Shares ISA into a seven-figure portfolio.
But what sort of shares might offer me that level of return without a high degree of risk?
All shares carry risk. But some are inherently more risky than others, taking into account the price I pay for them. Focusing on the prospect a big payday, it is easy just to look at the potential for a share to increase in value.
But one thing I have noticed about many abnormally successful investors is how seriously they take risk assessment. Rather than focus on the potential rewards of a particular share, they also spend a lot of time considering what might go wrong that could hurt its dividend prospects, or its price.
Finding the future massive winners
Still, if I wanted to turn a £20k Stocks and Shares ISA into a million-pound portfolio, simply avoiding risk would not be enough. I would also need shares that gave me a certain level of return.
Rather than setting some unrealistic targets though, what could really help me here is simply adopting the long-term approach to investing – and sticking to it.
Imagine I could earn an average 9% compound gain from dividends and share price appreciation, for example (which, right now, I potentially could by investing in 9%-plus-yielding shares like M&G and Vodafone, although dividends are not guaranteed to last).
My £20k Stocks and Shares ISA would be worth a million pounds in less than 50 years. Of course, £1m would be worth a lot less than it is now.
If I achieve a 15% compound annual gain I could hit that target in under 30 years. At a 20% compound annual gain, I could turn £20k into a million pounds in 23 years.
Admittedly, a 20% compound annual gain is difficult to achieve. But it is certainly not impossible. However, I have to accept that I might undershoot my target.
Yet if I can find the right shares to buy for my Stocks and Shares ISA, I think I could aim for that sort of return.
