For many of us who invest through a Stocks and Shares ISA, the long-term goal is to reach a stage where we can take a passive income. This could allow us to retire earlier or maybe have a more comfortable retirement.
Even if investing started later in life, it’s still possible to build meaningful wealth with a clear, disciplined approach.
After opening an investment account, preferably an ISA, the next step is to contribute regularly to build a capital base: set an affordable monthly amount, treat contributions like a bill, and increase them when possible.
With a growing capital base, focus shifts to investing wisely. For me, this means using data to inform investment decisions. Nothing should be left to luck.
And then it’s about letting compounding do the work. Small returns reinvested over years create material gains.
In short, a disciplined savings plan, combined with prudent stock selection and compounding, can transform a late start into a retirement-boosting ISA. It is never too late to begin.
Running some maths
The main variables when it comes to invest are time, returns, and contributions. With that in mind, I’ve created a table highlighting how much an investor would need to contribute depending on the annualised return to reach £500,000.
As we can see, the fewer the years until retirement, the more money an investor would need to contribute to hit this £500,000 figure. This monthly contribution falls depending on the annualised return and the time afforded for it to compound.
| Years to retire | Annualised return (%) | Monthly contribution (£) |
|---|---|---|
| 10 | 5 | 3,200 |
| 10 | 7 | 2,900 |
| 10 | 10 | 2,450 |
| 20 | 5 | 1,225 |
| 20 | 7 | 950 |
| 20 | 10 | 660 |
| 30 | 5 | 600 |
| 30 | 7 | 410 |
| 30 | 10 | 220 |
The final number shows us something very telling. Good investors with time only need a fraction of the money to reach their desired endpoint. In fact, we can see from this graph below that compound interest is doing all of the heavy lifting.
Where to invest?
Well, as I said before, I like a data-driven approach. And with that in mind, Hikma Pharmaceuticals (LSE:HIK) appears undervalued relative to its growth prospects. I certainly think it’s worth considering.
The stock trades on a forward price-to-earnings (P/E) of around 12 times for 2025, falling to just 9.3 times by 2027. That’s well below the FTSE 100 average.
Meanwhile, earnings per share are forecast to rise by roughly 31% between 2025 and 2027, supported by steady revenue expansion from $3.32bn to $3.71bn and margin gains as new capacity in the US comes online.
The company’s free cash flow yield is projected to rise from 5.6% to over 8%, offering scope for further dividend growth; payouts are expected to climb from $0.82 to $0.98 per share, implying a forward yield above 4%.
With net debt forecast to fall from $969m to $542m over the same period, Hikma is strengthening its balance sheet while maintaining a disciplined capital return policy.
In addition to the strong data, the company’s prospects are buoyed by upcoming opportunities in GLP-1s (weight loss drugs) as patents expire.
However, it’s worth remembering that tariffs and currency fluctuations haven’t been working in the business’s favour recently.
