I’m aiming to use my Stocks and Shares ISA to become a millionaire. With an annual contribution limit of £20,000, that’s not going to happen overnight, but I think it’s achievable over a 30-year period.
My plan is to add £16,000 into my regular Stocks and Shares ISA and the remaining £4,000 in my Lifetime ISA. To do that, I’ll need to invest just over £1,300 each month – here’s my plan for April.
Diversification
I’m taking a leaf out of Charlie Munger’s book this year with my investing. Instead of attempting to spread my money around widely, I’m going to focus aggressively on a smaller number of companies.
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In other words, my plan is to only buy one or two stocks each month – the ones that I take to be offering the best opportunities. I think this is the way to maximise my investment returns over time.
As Warren Buffett says, even a great company can be a bad investment at the wrong price. But I believe that concentrating on fewer businesses is a good way to avoid overpaying.
This should still allow me to build a diversified investment portfolio. But I’ll do it gradually, by buying different stocks as prices fluctuate and present different opportunities.
Investing in April
I’m looking to add shares in Forterra to my portfolio this month. With the brick manufacturer’s stock trading at its lowest prices for 12 months, I see this is a great time to be buying.
Obviously, there’s still risk with the stock – a prolonged UK recession might weigh on the company’s profitability. But I think the price right now is too good to miss.
Last month, Forterra shares were about 10% more expensive than they are today, which made them look less attractive. So I wasn’t buying them back then.
Instead, I was buying shares in Citigroup. The US bank was trading at a fraction of its book value, but its stock is up around 10% since then, making Forterra my preferred choice for this month.
The road to a million
Can I become a millionaire with this strategy? Nothing is guaranteed and there’s always the possibility of losing money, but I think this approach sets things up in my favour.
Using my full contribution limit each year for 30 years means that I’ll reach the magic number if I can average a 4% annual return. With interest rates in the UK at 4.25% I think that’s highly achievable.
That means I’ll need to target investments that I expect to generate at least a 4% return over time. They don’t have to offer that return immediately, but they need to average that over time.
The most important thing, though, is to be patient and disciplined when it comes to investing regularly in the best opportunities I can find. Doing this should give me the best chance.
