Playing the National Lottery can be an alluring way to make a million although, in reality, your chances of winning the jackpot are so small it’s virtually impossible. Indeed, as I outlined in my last article, you have higher chances of becoming prime minister of the United Kingdom than winning the lottery on the current odds.
However, there’s no need to give up on your dream of becoming a millionaire just yet. Today, I’m going to outline an investment strategy I believe can help anyone make this life-changing amount of money, and you don’t need to gamble your money on the National Lottery to get there.
Slow and steady wins the race
Many people view the stock market as a mysterious beast where fortunes can be won or lost at the drop of a hat. While this is true, the reality is much less glamorous. Some investors have built vast fortunes investing in the stock market, but for the most part, these fortunes have been acquired over many decades using patient, structured investment strategies rather than frenzied trading activity.
The ability of the stock market to create wealth is virtually unrivalled. Even though equity prices fluctuate daily, over the long term, the market has only gone up. Over the past 100 years, the rate of return has averaged around 9% per annum.
If my relatives had been financially savvy enough to start saving £100 (not adjusted for inflation) a month in 1919, and I had continued on the family tradition, at an annual rate of return of 9%, today the family fortune would be just under £100m — not bad for just £100 a month.
This is the strategy I think you should follow if you want to make a million. As long as you keep to a strict savings plan, and keep putting away a certain amount of money every month, it’s effortless to make £1m over the long term with the stock market, as the example above shows. Buying a simple FTSE 100 or FTSE 250 tracker will do all of the work for you.
How hard will it be?
How much you need to save very much depends on how quickly you want to make a million. Savers who are in a hurry and want to make it within a decade, need to put away £5,200 a month at an average annual interest rate of 9%, according to my figures. But the longer you save, the easier it is.
My numbers show that a monthly deposit only £1,500 is required at an average annual interest rate of 9% to hi the target within a time frame of two decades.
For savers who have even more time on their hands, the monthly contribution is even less. You need to put away £600 a month for 30 years to make £1m, according to my data.
So there we have it. Playing the National Lottery might not make you a millionaire, but there’s a strong chance investing in the stock market will. The only downside is, you might have to wait a bit longer for the money to start rolling in.
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Rupert Hargreaves owns no share 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.