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Forget that £170m EuroMillions jackpot! Here’s another way to get rich and retire early

So it wasn’t you after all. The blockbuster £170m EuroMillions jackpot draw was yesterday, and you’re no better off than you were. Bad luck. At least the winner came from these shores, making them the UK’s biggest ever Lottery winner, richer even than pop star Ed Sheeran, apparently.

Forget the Lottery

You cannot rely on winning the Lottery to make a life-changing amount of wealth, because the chances of success are vanishingly small. If you want to make a million, the stock market can get you there. It won’t make you richer than Mr Sheeran, but it makes more sense than relying on blind chance.

I’d start by doing something simple, like setting up a regular monthly payment into a FTSE 100 tracker, such as the iShares Core FTSE 100 or HSBC FTSE 100 Index. Buy them inside a Stocks and Shares ISA, so you can take all your income and growth free of tax. You can find the names of some of the UK’s top Stocks and Shares ISA providers here.

If you invest £100 a month and your fund delivers an average total return of 7% a year, after charges, you will have almost £53,000 after 20 years and £256,000 after 40 years, provided you reinvest all your dividends (as you must). This shows the magic of compound interest. The longer you give it to grow, the more your returns will be multiplied.

Money in, more money out

You’re still short of a million, though. To hit that magic target, you ideally need to invest a lot more than £100 a month. If you can stretch to £300, after 40 years you’ll have more than three quarters of a million in your pot. If you have other retirement savings, such as a company or personal pension, by the time you retire you could have that million.

Look, I know this isn’t like winning those EuroMillions. Building your wealth on the stock market takes time, effort and patience. You have to pay in a lot more than your £1 lottery ticket, but your chances of ultimate success are so much greater.

Turn volatility to your advantage

If you are worried about stock market volatility, and we may see plenty of it this autumn, then set up a regular monthly savings plan rather than paying in large a lump sum. That way, you actually benefit if share prices fall, as your monthly payment will pick up more stocks, which will pay you more dividends, which will compound at a faster rate.

As well as investing in FTSE 100 blue-chips, you could turbocharge your portfolio growth by seeking out smaller companies as well. You will find plenty of stock tips on this site but you may prefer to spread your risk with a fund. Liontrust UK Smaller Companies is up to a mighty 401% over the last 10 years, TB Amati UK Smaller Companies is up 383%, and Marlborough UK Micro-Cap Growth is up 363%.

Time is on your side

Remember, past performance is no guide to the future. Smaller companies tend to outperform when the economy grows, and takes a hit when it wobbles. Short-term stock market turbulence isn’t a problem if you’re investing over periods measured in decades. Simply wait for share prices to recover, as they always have in the past. 

You can continue to dream of those EuroMillions as well. Just don’t rely on them.

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Harvey Jones holds units in the iShares FTSE 100 Core ETF and Marlborough UK Micro-Cap Growth, but has no position in any of the shares 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.