I’d drip feed £497 a month into a Stocks and Shares ISA to aim for a million

I think UK businesses like this strong performer can help me build towards a million-pound Stocks and Shares ISA over time.

| 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.

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.

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.

Investing within a Stocks and Shares ISA can be a great way to build wealth.

According to HM Revenue and Customs (HMRC), the number of ISA millionaires in the UK has surged to more than 4,000.

The rules say we can invest as much as £20,000 in an ISA each year. Then that money can grow via investments without attracting tax.

Should you invest £1,000 in Judges Scientific Plc 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 Judges Scientific Plc made the list?

See the 6 stocks

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

However, not many people have that much money free each year to bung into shares. So I’d plan to invest just £497 a month, which adds up to £5,964 a year.

Small beginnings can lead to big things

But that lesser amount would still have the potential to make a big impact over time and may lead to a portfolio worth a million.

US multi-billionaire investor Warren Buffett reckons America’s S&P 500 index has delivered compound annual gains running at just over 10% since the 1960s. If I can replicate that rate of return, it would take around 29 years to build an investment of £497 a month into a pot worth a million.

Buffett’s own record over the same period is almost double that 10% average annual return. But, of course, there are no guarantees I can match Buffett’s performance or that of the S&P 500.

Nevertheless, those ISA millionaires have clearly performed well. But most played the long game because the process of compounding can lead to bigger gains over time.

Another important factor is careful business selection. That means doing plenty of initial research before buying any particular stock.

Like most investors, I keep my best ideas on a watch list and aim to execute the purchase of shares at opportune moments. For example, right now I like the look of Bakkavor (LSE: BAKK).

Trading well and improving

The company is a UK-based provider of fresh prepared food in the UK, US and China, which it supplies to supermarkets and other outlets.

Trading has been going well and the progress reflects in the share-price chart.

Created with Highcharts 11.4.3Bakkavor Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

September’s half-year report shows more progress with the numbers. The outlook statement declares the directors are “confident” the firm will deliver profit ahead of expectations for 2024.

Meanwhile, City analysts have pencilled in a 22% jump for normalised earnings this year and just over 10% for 2025.

I like the food sector for its defensive characteristics. Firms like Bakkavor are often less affected by the ups and downs of the economy than some others. Nevertheless, the stock comes with its risks.

The economic shocks of the past few years have caused the business difficulties and that shows in the poor multi-year earnings record. Part of the problem is the operating margin is quite low, running at about 4.9%. It’s possible challenges may continue over the coming years.

Nevertheless, chief executive Mike Edwards said restructuring activity is supporting the company’s 2024 performance. The directors are focused on rebuilding margins and they are “excited” about developing a stronger business as general economic conditions improve.

On balance, and despite the risks, I’d research and consider Bakkavor for inclusion in a diversified long-term portfolio now. After all, with the share price in the ballpark of 152p, the forward-looking dividend yield for 2025 is a tasty 5.4%.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 »