The Motley Fool

Forget The National Lottery! Here’s how I’d aim to become an ISA millionaire

Playing The National Lottery twice per week may not seem like a significant cost in the short run. However, over the long run it could amount to a sizeable sum of money that, if invested in a range of mid-cap shares, could improve an individual’s chance of becoming an ISA millionaire.

Furthermore, individuals who are able to invest in a range of high-quality shares at low prices may find that they are able to generate even higher returns than the wider stock market in the long run. As such, and with the odds of winning the lottery being around one in 45m, now could be the right time to invest, rather than play the lottery.

Nest egg

Playing the lottery twice per week amounts to a total cost of £208 per year. Over the course of an individual’s working life, this amounts to a total sum of £10,192. While there is, of course, a chance that there will be winning tickets of a variety of amounts during that 49-year period, investing the money in mid-cap shares through a Stocks and Shares ISA could be a better idea.

In fact, with mid-cap shares generally offering an annualised total return in the high-single digits over the long run, the £4 per week to play both lottery draws could become £155,000 by the time an individual reaches State Pension age. And since it is possible to invest in a tracker fund, the amount of effort required to achieve that figure may be less than purchasing a lottery ticket twice per week.

Growth potential

Of course, it may be possible to generate higher returns than the stock market average. Through focusing on company fundamentals, such as balance sheet strength and cash flow, an individual may be able to select better-performing shares than average. When purchased at a price which is attractive, this could move the risk/reward ratio further into an investor’s favour, and could lead to a larger nest egg in the long run.

At the present time, there are a number of sectors which could offer high investment appeal compared to the wider index. For example, consumer goods companies with exposure to emerging markets may be able to generate high levels of profit growth, while UK housebuilders appear to offer low valuations alongside continued high demand for new homes.

Risks

Certainly, shares can fall in value. After a decade-long bull market, many investors may be of the view that the UK stock market is due for a pullback. While this cannot be ruled out, the index has a number of high-yielding stocks that trade on low valuations. And with the world economy continuing to offer strong growth, now could prove to be a good time to invest for the long run.

Furthermore, money that is used to play the lottery may be considered ‘risk capital’ by the individual. As such, short-term losses may not pose such a great threat, since the long-term growth potential on offer may be highly appealing.

F.I.R.E. Starter

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