We all dream of one day getting rich and retiring early, maybe by investing in the stock market. It’s a goal that might be closer than you think. The huge number of ISA millionaires that have made their fortunes with UK shares over the past decade is perfect evidence of this.
You don’t necessarily need to spend huge sums to get a place on millionaire’s row, either. And unlike many other forms of investment (like buy-to-let) stock investing doesn’t require constant effort to hit your target. Once you’ve created a sound investment strategy and built a balanced portfolio of quality UK shares, you can sit back and let the miracle of compounding do the work for you.
Compound gains
So what is compounding? Well at The Motley Fool we describe it as “the process whereby money earned from an investment builds upon itself over longer periods of time.”
When you own a savings account this ‘money earned’ refers to the interest you receive, on which you then earn further interest provided you don’t withdraw it. In the case of share investing, money earned refers to the dividends you receive.
And boy, those who use the dividends from their UK shares to buy more stock really can expect to make a fortune. Just ask one of those aforementioned ISA millionaires.
Getting rich with UK shares
The last dividend I received from my UK shares was £44.09 which I got from my Unilever shares. It’s not the sort of sum that set my pulse racing. But it’s put me one rung further up the ladder to making a million of my own.
The beauty of buying dividend-paying UK shares, though, is that such payouts come on a regular basis. And if you build a portfolio of stocks like this you can expect to receive a river of income from your investments. You can then reinvest these dividends to buy more shares, which in turn generate more dividends that can be used to purchase even more stock. And so the cycle continues.
Thinking like Einstein
Over the past 12 months I’ve received around £175 in dividends from my Unilever stock. And I’ve reinvested it to grow the size of my portfolio, along with all the other dividends I’ve received from my UK shares. I’m picking up more and more stock and I’m not even having to do much. I’m simply letting my money do all the hard work for me.
There’s a reason why Albert Einstein proclaimed that “compound interest is the eighth wonder of the world.” By ploughing back your shareholder payouts you can realistically expect to get filthy rich like those ISA millionaires. With the help of The Motley Fool’s huge library of special reports you can dig out some of the best dividend-paying UK shares that money can buy. And the 2020 stock market crash means that you can pick up plenty of these for next to nothing, too.
