The idea of becoming a stock market millionaire may seem fantastical. But is it? Or could I really aim for a million by investing in shares even if I had not invested before?
I think I could – and reckon 2024 could be as good a time as any to start trying.
Millionaire aspirations
First let’s consider what it would take to aim for a million.
If I invested £1,000 each month and achieved a compound annual gain of 15%, I would be a millionaire after 19 years.
In other words, if I aim for a million by starting to invest next week on that basis, I could be a stock market millionaire by 2042.
Hitting the target
Admittedly, £1,000 per month is quite a big commitment. But being a millionaire does take commitment, after all.
If I had less money to invest each month, I could still aim for a million. I would simply need to be more patient.
What about the 15% compound annual gain I use in my example, however? How realistic is that?
I think it is doable but challenging.
Warren Buffett’s Berkshire Hathaway has shown a per-share compound annual book value growth rate of almost 20% over a period stretching back six decades. I am no Buffett, but I could aim for my goal by learning from proven investors like him.
Finding shares to buy
Still, I would definitely have my work cut out to try and achieve a 15% compound annual growth rate over almost two decades.
My approach would involve a few key principles.
I would focus on long-term investing, not trading. So I would be looking for companies I reckoned could unlock substantial value over the years and decades to come.
For example, I think search giant Google (owned by Alphabet) could continue to build on its existing successes. So could Apple. In fact there is a host of businesses I think could do very well, some already well-established and others newer contenders.
But aiming for the sort of return I am after is not just about finding great businesses to buy into. It also involves doing that at the right price.
What if I could not achieve a 15% compound annual growth rate? At a 5% rate, for example, while investing £1,000 per month it would take me 34 years to become a stock market millionaire.
Compounding my earnings
If I choose shares that do well, I might end up holding them for a long time as I aim for a million.
But in some cases, I may sell them. I could also receive dividends along the way in some cases. Rather than take the cash out of my portfolio, I would simply keep reinvesting it in more shares. That is known as compounding and could help me build my wealth faster.
Choosing the right shares matters. There are risks, after all. Depending on what shares I buy, I might end up losing some of my capital.
Becoming a millionaire is a long-term project. But I think it is a realistic goal, if I approach it the right way. The longer I wait, the further off my goal will seem. So 2024 seems to me as good a time as any to get going!
