UK investors don’t need huge amounts of cash to start building a portfolio of stocks and shares. £100 is more than enough.
Investing this regularly over time can lead to lifelong passive income. But every journey starts with the first step.
Regular investing
If you can find £100 from your monthly salary, you can start investing. And in some ways, it’s best to start small.
Investing part of your monthly salary has some real advantages over making an immediate move. One is diversification.
Having a diversified portfolio helps limit portfolio risk. It reduces the overall impact of an investment going wrong.
The trouble is, not all stocks are cheap at the same time. And that creates a dilemma for investors who want to go big straight away. They either have to buy stocks that are expensive or focus on a limited group of shares. Neither is an attractive option.
Regular investing, however, lets you buy whatever stocks are cheap. And you can build a diversified portfolio over time.
How much can you earn?
What can you achieve by investing £100 a month? It might be more than you think.
Over the last five years, the FTSE 100 has returned 83%. Finding that kind of return elsewhere has been extremely hard. That’s the equivalent of 12.85% a year. And investing £100 a month at that rate can have spectacular results.
In the first year, the return is £83.52. But by reinvesting the dividends, investors can aim for £2,609 by Year 10, £11,562 by Year 20, and £41,551 by Year 30.
Not all of that comes back as dividends – some of it is reinvested by the businesses. But the FTSE 100 has some really interesting stocks. For investors with a long-term focus, the question isn’t what they can earn today. It’s what they could be getting in the future.
FTSE 100 stocks
It might seem like a strange time to look at InterContinental Hotels Group (LSE:IHG). Global conflict is a genuine risk for the business.
Importantly, though, the firm has shown a lot of resilience in the past. Covid-19 was a major disruption, but the company rebounded strongly.
From a dividend perspective, a 1.28% yield doesn’t seem like a lot. But this has grown by an average 6% a year during the last decade.
The company has around 1m rooms and around 33% more in the pipeline. But the real key is its business model. Rather than owning its hotels, it franchises them. That means the cost of growing and maintaining its network is minimal.
This gives the firm unusually strong long-term growth prospects. And it’s also why I think there’s a lot more dividend growth to come.
£100
Earning £41,551 by investing £100 a month for 30 years is a big ask. But I don’t think it’s outside the bounds of possibility.
What I’m convinced about, though, is that compounding returns over time can lead to great returns. And this means one thing.
Whether it’s £100, £10, or £1,000, the most important force in investing is time. There’s no quick way to get to 30-year returns. The best way to bring forward that long-term return date is to get started. And I think InterContinental Hotels Group is well worth a look.
