Wouldn’t it be great to make a million by investing in UK shares? It sounds like a fantasy, but ordinary people really can do it. The catch? They have to stick at it.
To make a million for your retirement, it pays to be proactive. That means starting at the earliest possible age. As I wrote recently, a 25-year-old could hit that target by investing £500 a month in UK shares. Unfortunately, only a handful of people will have sufficient disposable income at that age. Most will have more immediate spending priorities.
To make a million, whatever your age, you have to put it at the top of your to-do list. That means cutting back on frivolous spending, and using the savings to go shopping for UK shares. Not everyone will want to do that.
I’m taking my time over this
The sooner you begin investing, the better your chances of success. Nobody can expect to make a million from UK shares overnight. You need to invest across your working lifetime, so I’m talking 30 or 40 years.
I’m not hanging around waiting for the pandemic to pass before buying shares. I reckon 2020 has actually been a great year to invest, because top UK shares have been available at bargain prices ever since the crash in March.
That may sound counterintuitive, but if you’re investing for 30 or 40 years, this year’s troubles will one-day seem like a blip. Investors who took advantage and bought cut-price UK shares will continue to benefit long after the Covid-19 crisis slips from our memories.
I would look to build a balanced portfolio of UK shares covering different sectors, or a combination of both income and growth. So I might buy FTSE 100 energy giants like BP and Royal Dutch Shell, banks like Barclays and Lloyds Banking Group, consumer goods giants such as Reckitt Benckiser Group and Unilever, utilities such as National Grid and SSE, and mining giants such as BHP Group and Rio Tinto. These are all big, established names.
This is how I plan to make a million
Their share prices may not shoot the lights out in the short term, but should deliver a winning combination of income and growth over the longer run. To make a million, reinvest all those juicy dividends for growth.
Not everyone is ready to buy individual shares. A simpler way is to invest in a low-cost FTSE 100 and FTSE 250 tracker fund. Everybody should use their Stocks and Shares ISA allowance, for tax-free returns.
When I first started investing, I used to check my portfolio several times a day. Now I do it several times a year. I don’t bother about short-term stock market ups and downs, and I never sell in a crash. Instead, I’ll take the opportunity to buy more cheap UK shares.
To make a million, you have to take the rough with the smooth and, like I said, stick with it.
You could start with this stock idea.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Lloyds Banking Group, and Unilever. 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.