How I’d start investing today to aim to build a £1.3m portfolio from scratch

Our author isn’t banking on luck to achieve his wealth goals. Instead, he believes the smartest path to success is to start investing for the long term.

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BUY AND HOLD spelled in letters on top of a pile of books. Alongside is a piggy bank in glasses. Buy and hold is a popular long term stock and shares strategy.

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The best time to start investing is today.

Whether I have £500 or £50,000, it’s not about the amount but how wisely I allocate it. The key to success is starting early and staying consistent.

Investing £200 a month over 40 years, with an average annual return of 10%, could grow to around £1.3m. A 10% annual return is a reasonable expectation based on the historical performance of the S&P 500, America’s most-tracked index of its largest 500 companies.

Should you invest £1,000 in Games Workshop right now?

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Pound-cost averaging

When I started investing, I found pound-cost averaging to be the most effective method for me. I invest a small amount of disposable income from each paycheque into top companies every month, regardless of their current valuation.

As long as these businesses have solid long-term prospects, I keep buying over the years. It’s a simple and reliable approach to building wealth.

One key principle I stick to is diversification. I spread my investments across different businesses to avoid having all my money tied up in just one, reducing the risk of any single company’s downturn.

Getting started

It couldn’t be easier to begin. First of all, I need a Stocks and Shares ISA or a share-dealing account. The provider I’m most fond of is Interactive Investor.

Then, I need a way to source good investments. Thankfully, The Motley Fool UK has this covered, with a range of services and writers identifying top investments every day.

One company I see as a strong long-term investment for pound-cost averaging is Games Workshop (LSE:GAW). This seemingly modest fantasy wargame miniatures developer has grown an impressive 1,600% in price over the last 10 years. On top of that, it offers a healthy 3.5% dividend yield, putting cash in my pocket every year. Bear in mind, though, that management can cut the dividend if market conditions require it.

Created with Highcharts 11.4.3Games Workshop Group Plc PriceZoom1M3M6MYTD1Y5Y10YALL26 Sep 201427 Sep 2024Zoom ▾20152016201720182019202020212022202320242016201620182018202020202022202220242024www.fool.co.uk

Analysts expect the company’s earnings growth to slow down over the next few years. But this could actually be a great time to buy, as the current valuation looks reasonable. If its earnings growth picks up again, the stock could see significant gains, and by getting in early, I’d be well-positioned to benefit.

However, every investment comes with risks. Games Workshop has already well-established itself in Western markets, so the company is now looking overseas for growth. Any challenges it faces in expanding into new regions could limit future share price gains over the long term.

Staying the course

I’ve found that one of the best ways to generate strong portfolio profits is by being part of a solid community of investors. That’s one of the main reasons why I appreciate The Motley Fool UK.

More than anything, investing is a lifelong skill. It takes time, patience, and perseverance to build wealth. Developing a successful portfolio is far from a get-rich-quick scheme, and that’s exactly why it works.

As I mentioned, if I invest £200 per month from scratch, I could grow a portfolio worth £1.3m in 40 years, assuming a 10% annual return. Wealth isn’t about luck, it’s about knowledge, preparation, and time spent in the market.

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.

Oliver Rodzianko has positions in Games Workshop Group Plc. The Motley Fool UK has recommended Games Workshop 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.

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