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I’d invest £5k in cheap FTSE 100 shares to make a million and retire early

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Right now, investors can choose from a host of cheap FTSE 100 shares. This gives you a great opportunity to top up your Stocks and Shares ISA allowance. If you do that year after year, you could put yourself in the perfect position to retire early and enjoy the years thereafter.

Making a tax-free million inside an ISA can be done, but it’ll take time. So put aside all dreams of overnight riches. Investing £5k won’t generate a million on its own, obviously, but it will push you a little further along the path.

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Anybody who approaches the stock market with a get-rich-quick mentality will make bad decisions. You need to take a long-term view, and buy cheap FTSE 100 shares when you can. The current stock market crash offers an opportunity.

Plan now to make a million

That’s because it gives you the opportunity to buy cheap FTSE 100 shares at much lower valuations than just a couple of months ago.

The FTSE 100 has recovered since dipping below 5,000 in March. As I write, the stock market rebound has driven it to nearly 6,000, a rise of 20%. Those who took advantage of the initial crash will be that bit closer to making a million.

Building a £1m ISA portfolio is a mighty task to set yourself, and you can’t afford to hang around. If you see a chance to buy cheap FTSE 100 shares, you should take it. That means investing your £5k, or any other sum, when you can.

You can invest up to £20,000 this year inside an ISA. That may be beyond many people’s reach, but do your best. The more you put away each year, the better your chances of making a million-pound ISA.

Buy cheap FTSE 100 shares today

To make a million, I’d start with a spread of FTSE 100 stocks, focusing on companies that should survive the coronavirus in relatively good shape. I’d look for strong balance sheets, loyal customers, and a competitive ‘moat’ that discourages competitors. If you can find a company that’s continuing to pay its dividend, that may also indicate financial strength. 

If aiming to make a million, the dividend is one of your best friends. If you reinvest these for growth, compound interest will power your portfolio forwards.

The global economy will take a massive hit this year, and may not return to full vigour until well into next year. However, I wouldn’t wait until then before you start buying cheap FTSE 100 shares, otherwise you could miss the first leg of the economic recovery.

Also, it takes time to make a million pound ISA portfolio. We are talking decades. The earlier you start, the longer you have, and you the better your chances of success. Good luck!

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Harvey Jones 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.

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