Here’s how I’d use a Stocks and Shares ISA to aim for a million

This writer thinks taking the right long-term approach to investing could help him turn his Stocks and Shares ISA into a goldmine. Here’s how.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Aerial shot showing an aircraft shadow flying over an idyllic beach

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 idea of becoming a stock market millionaire has a certain appeal. I also think it is possible, even from a standing start and with no savings.

But turning an ambitious goal like that into reality takes more than just positive thinking and optimism. It needs a realistic plan of action. I reckon I could use a Stocks and Shares ISA to aim for a million.

Here’s how.

Should you invest £1,000 in NatWest Group right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if NatWest Group made the list?

See the 6 stocks

Setting the right timeframe

To begin, note that this is a long-term goal. I would not expect to start with nothing and become a millionaire in a short time. Instead my timeline here is in decades.

What is the benefit of such a long-term approach to investing?

As I see it, it means I can do the work upfront of putting aside money and finding shares to buy. Then, if I choose the right shares, I can let time do the heavy lifting of turning my Stocks and Shares ISA into a portfolio of far higher value than the money I put in.

Investing with a long-term vision

Speaking of putting money in, how much would I invest? Everyone’s financial circumstances are different and any smart investment approach needs to reflect that. In this example, I imagine investing £850 each month.

To do that, I would set up a Stocks and Shares ISA – there are lots to choose from – then start putting my money into it regularly.

Ongoing target as I aim for a million

Talking about getting my ISA value up to seven figures is ambitious. Breaking that down into a smaller series of targets could help me focus.

To achieve that goal, what would I need to do? If I put in £850 each month and can grow my Stocks and Shares ISA at a compounded annual rate of 8%, it ought to be worth a million pounds after 28 years. As I said, this is a long-term plan. Becoming a millionaire takes time and effort.

Looking for shares to buy

So what sort of shares might let me achieve that average annual compound annual growth rate of 8%? I would spread my Stocks and Shares ISA over a few different choices, so that disappointing performance by one would have a limited effect on my overall performance.

The 8% could come from either growth, dividends (that I would reinvest) – or both. An example of a share I own that I hope could give me both is Reckitt (LSE: RKT).

It sells consumer goods, a market I expect to benefit from long-term customer demand. Thanks to its collection of premium brands such as Vanish, it is able to charge a higher price for its products than unbranded competitors. That is good for profits.

Created with Highcharts 11.4.3Reckitt Benckiser Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The company’s shares have performed weakly in recent years. In part that is due to a disastrous acquisition of a nutrition business and I see a risk that it will continue to dog Reckitt’s overall performance even though the company has slimmed it down considerably.

Still, I saw the share price weakness as a buying opportunity and hopefully will receive regular dividends while I own the shares — and aim for a million!

But here’s another bargain investment that looks absurdly dirt-cheap:

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

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 Reckitt Benckiser Group Plc. The Motley Fool UK has recommended Reckitt Benckiser Group 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.

More on Investing Articles

Investing Articles

2 FTSE 100 and FTSE 250 stocks to consider as stock markets plummet!

Looking for lifeboats as growth-crushing trade tariffs loom? Here are two (including a FTSE 100 gold stock) I think merit…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Happy young plus size woman sitting at kitchen table and watching tv series on tablet computer
Investing Articles

£10,000 invested in Watches of Switzerland shares 1 year ago is now worth…

Watches of Switzerland shares have been decimated by Trump’s tariffs on Switzerland. Dr James Fox explores whether this is an…

Read more »

Hand flipping wooden cubes for change wording" Panic " to " Calm".
Investing Articles

Growth stocks are crashing! Here’s what I’m doing now

Our writer shares his thoughts as growth stocks get crushed, as well as a favourite from the Nasdaq that he…

Read more »

Investing Articles

What’s going on with the Nvidia share price now?

The Nvidia share price is tanking. Once the most valuable listed company, Nvidia has seen more than $1trn wiped off…

Read more »

Investing Articles

This FTSE AIM stock has £2.3bn in net cash, and a market cap of £2.4bn!

I love this FTSE AIM stock, but it really hasn’t delivered for me yet. The stock trades with crazily low…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

Down 15% in a week! Are these 5 FTSE 100 fallers screaming buys as markets plunge?

Five of Harvey Jones's favourite FTSE 100 stocks all have the same thing in common – they've fallen around 15%…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

2 stocks that have been crushed and now offer a ton of value

Edward Sheldon has been scanning the market for stocks that offer value after the sell-off. Here are two shares he…

Read more »