While playing the National Lottery can be fun, it is unlikely to make you a millionaire. With odds of 45m-1, it will probably lead to disappointment – even over the long run.
A better way to try to improve your financial future could be to invest in the stock market. With a variety of tax efficient accounts available, as well as regular investment services that offer low cost share-dealing, now could be the right time to start buying stocks across a range of sectors. In the long run, it could improve your chances of making a million.
Tax efficiency
Perhaps the first place to start when investing is to ensure your portfolio remains tax efficient over the long run. Certainly, for many investors the annual capital gains and dividend tax allowances may prove to be sufficient in the short run. But for any investor with a long-term horizon, or who aims to generate a seven-figure portfolio, avoiding unnecessary taxes could be a worthwhile move.
An obvious means of achieving this goal is to use a Stocks and Shares ISA. This operates in a similar fashion to a share-dealing account, in terms of how it is opened and managed by an investor. However, no tax is levied on any amounts invested within it. This could lead to significant savings in the long run, as well as higher returns.
Simplicity
Many investors attempt to outperform the wider stock market. This in itself can be a sound move, but if it lacks focus then it may lead to disappointing results. As such, it may be prudent to stick to sectors and industries that you fully understand, and of which you have a thorough knowledge. This may allow you to unearth the very best opportunities for the long term.
Over time, it is a good idea to diversify in a range of sectors. But, to start with, buying a tracker fund alongside buying shares in companies that are within your sphere of knowledge could prove to be the best means of outperforming the index, while also obtaining diversification in order to reduce risk.
Regular investing
Attempting to time the ups and downs of the stock market can be a difficult plan to execute consistently. There are a wide range of variables which can affect the short-term movement of share prices.
Therefore, it may be a good idea to simply focus on the value of the stocks you are buying versus their intrinsic values. This may in itself highlight opportune moments to buy stocks, while avoiding making risky calls on the prospects for the wider index.
There are always risks facing the stock market which can ultimately lead to bear markets. However, as the stock market’s past performance shows, it can enjoy prolonged bull markets despite risks being present. This may mean that it is better to invest now, rather than experience a prolonged delay waiting for the wider market to fall.
