All-time high! Could putting £900 a month into FTSE 100 shares make me a millionaire?

By putting under £1,000 each month into carefully chosen FTSE 100 shares, this writer thinks he could become a millionaire in 25 years.

| More on:
Young mixed-race couple sat on the beach looking out over the sea

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 FTSE 100 is a collection of the UK stock market’s biggest companies. They are not necessarily the biggest and best. But, to have become big enough to merit inclusion in the index, most of the businesses must have been doing quite a few things right, I reckon.

The FTSE 100 hit a new all-time high this week.

That might make it seem like an odd time to start buying. But, in fact, I think drip-feeding money regularly into FTSE 100 shares could help me build serious long-term wealth.

Now strikes me as being as good a time as any to start.

New all-time high does not mean there aren’t bargains

The thing is, although the index overall hit a new all-time high, I continue to think quite a few of the shares in it are attractively priced.

From Natwest with its price-to-earnings ratio of seven to the Vodafone share price in pennies and the 10.2% dividend yield on offer at Phoenix (LSE: PHNX), there are some apparent bargains in the London market.

But what looks like a bargain and what turns outs to be a bargain are not always the same thing.

Maybe companies are priced the way are because high interest rates and weak consumer spending mean their future profits could be lower than their past ones.

Having said that, a lot of FTSE 100 shares do look like bargains to me at the moment. I think they could offer me long-term potential for wealth creation both in terms of share price growth and dividends.

Aiming for a million

Imagine I put £900 each month into a Stocks and Shares ISA.

If I could achieve a 10% compound annual growth rate and reinvested any funds as I went (known as compounding), then after 25% years I would have an ISA worth over a million pounds.

But how realistic is a 10% compound annual growth?

At the moment, I could earn that in dividends alone from some shares: Phoenix is an example. But dividends are never guaranteed. Vodafone is one of the highest-yielding FTSE 100 shares but has announced plans to halve its dividend.

On top of that, share price growth also factors into total compound annual growth. Despite its attractive dividend yield, Phoenix has seen its share price decline by 25% in the past five years.

Finding the right shares to buy

I would spread my monthly £900 over a range of FTSE 100 shares.

I think the 10% target is tough but achievable. Even for Phoenix, for example, a growing dividend per share could help boost my future yield if I buy today. Meanwhile, I see scope for share price recovery. The recent performance seems poor given the business’s strengths, including a  large customer base and well-known brands such as Standard Life.

Rocky financial markets could lead some of its assets to produce a loss not a profit, something I see as a risk to profitability over the long term.

But some cheap-looking FTSE 100 shares like Phoenix really do strike me as the sorts of bargains I would happily buy for my ISA if I had spare cash to invest.

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.

C Ruane has positions in Vodafone Group Public and Natwest. The Motley Fool UK has recommended Vodafone Group Public. 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

Turning a £20k ISA into a stunning £38,023 a year passive income

Harvey Jones says investing regular sums in a Stocks and Shares ISA is a brilliant way of building up a…

Read more »

Growth Shares

Growth stock YouGov just fell 46%. Time to buy?

YouGov’s share price just fell from 820p to 440p after a poor trading update. Is now a good time to…

Read more »

Investing Articles

2 mouthwatering FTSE growth stocks I’d buy and hold for 10 years

Growth stocks purchased today could be the gateway to many years of capital growth and returns. Here are two picks…

Read more »

Investing Articles

Can the IAG share price really be as dirt cheap as it looks?

While most shares have recovered since the Covid days, the IAG share price is staying stuck to rock bottom. Surely…

Read more »

Investing Articles

BAE Systems shares are flying! Have I missed the boat?

Sumayya Mansoor looks into whether or not BAE Systems shares are still a good buy for her portfolio after the…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

1 heavyweight FTSE 100 share I’d buy as London retakes its crown

Some Footsie firms are extremely large, but that doesn't mean they couldn't get even bigger. Here's one such FTSE 100…

Read more »

Investing Articles

I’d buy 5,127 National Grid shares to generate £250 of monthly passive income

With a dividend yield of 6.5%, Muhammad Cheema takes a look at how National Grid shares can generate a healthy…

Read more »

Investing Articles

The FTSE 100’s newest member looks like a no-brainer to me!

This Fool explains why she sees the newest member of the FTSE 100 as a great opportunity after its recent…

Read more »