All investors have dreams of becoming a stock market millionaire, right? Making life-changing wealth is why we take the time and effort to carefully research UK shares and come up with investing strategies.
For many it may seem like a pipe dream. But making vast fortunes is well within the reach of everyday investors like me. The hundreds of Stocks and Shares ISA millionaires who have sprung up over the past decade show how this is possible.
Keeping things simple can be an important part of a winning investment strategy. I think that even investing in just 10 UK shares might help me create a stock portfolio that could reach £1m!
Compound miracles
It’s possible to make considerable wealth with share investing thanks to the miracle of compounding. Essentially what this means is reinvesting all the dividends I receive from buying my stocks. That way I can earn money on the original investment as well as on the dividends I’ve received.
Let me show you how this miracle could make me a stock market millionaire. If I invested £150,000 in UK shares and it compounded at an average yearly rate of 10% I would, after 20 years, have made a whopping £1,009,125.
I realise very few of us have a cool £150,000 to invest straight off the bat. But the beauty of compounding is that even those who regularly invest smaller amounts can also get seriously rich.
Let’s say an investor has £500 to invest each month. They’d take longer to hit that magic million marker based on that 10% annual return. But they’d still hit the target in just over three decades.
Modern advantages
These calculations, of course, assume that the average 10% return of the past 10 years will continue. However, with stock investing such a return can never be guaranteed. Markets can go down as well as up. And just one poor investment decision can create massive damage across my entire portfolio.
Modern investors, however, have a significant advantage over those of previous generations. Company reports, analyst notes, stock tips, and up-to-date economic and business news are all available at the click of a mouse.
Living in the internet age is a huge advantage that can help investors generate market-beating returns. Gathering information on what the world’s most successful investors are doing is a particularly useful tool that I like to use.
Thinking like Buffett
Billionaire Warren Buffett is one person whose investment strategy I follow closely. The wonders of the internet mean I can see what his Berkshire Hathaway firm is invested in within seconds. Its something I like to consider when I’m deciding what to buy for my own shares portfolio.
One key thing I’ve noticed is that Buffett doesn’t invest huge sums across a huge number of stocks. In fact Berkshire Hathaway currently has a whopping 87.19% of its shares portfolio invested in just 10 companies like Apple and Coca-Cola.
Owning 10 UK shares could allow me to diversify my portfolio without having to spend time researching hundreds of stocks. And as Warren Buffett has proved, it could set me on the road to building significant long-term wealth.
It might even help me to become a stock market millionaire.
