I’d aim for a million buying only 10 shares

By taking a long-term approach to investing in the stock market, this writer believes he could realistically aim for a million. Here’s how!

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Young mixed-race couple sat on the beach looking out over the sea

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Is it possible to aim for a million in the stock market, using part of a common salary to invest on a regular basis?

I believe it is. My approach would focus very much on keeping things simple. I would stick to just five to 10 blue-chip shares.

Rather than trying to spot some little-known company I thought could become the next big thing, I would stay firmly inside the FTSE 100 and stick to companies I knew and reckoned I understood.

The benefit of long-term investing

To aim for a million seriously, I think an investor needs to be realistic about timeframes.

I see this as a long-term project stretching over decades. Very few people put a modest amount of money in the stock market and make a million within just a few years, after all.

Imagine I invest £1,000 each month into a Stocks and Shares ISA. After 25 years, that would already mean I had invested £300,000. I would be almost a third of the way towards my million pound target without even considering any investment returns.

But as my goal is to aim for a million, £300,000 would leave me far off where I wanted to be.

That is why, along the way, I would steadily drip-feed money into shares of what I saw as high-quality businesses. By buying at an attractive price, hopefully I could benefit from share price gains as well as dividends.

How compounding dividends could help me become a millionaire

In fact, dividends are an important part of my plan to aim for a million.

Rather than just withdrawing them from my ISA as cash, I would reinvest them. That is known as compounding.

Compounding can lead to significant financial results over the long term. If I invested £1,000 into my ISA each month and achieved a compound annual growth rate of 10%, I would already be a millionaire after 24 years.

Finding shares to buy that could help me aim for a million

But while a 10% compound annual growth rate might not sound that high, it could actually be quite challenging to achieve.

Take British American Tobacco as an example. I own the shares, partly because they yield 9%. But they have lost around a quarter of their value over the past five years.

So a 9% yield today would not even translate into a 9% compound annual growth rate over the past five years.

To aim for a million, as with any investing target, I aim to find shares in what I see as brilliant businesses that sell for less than I think they are worth.

So I consider how large a company’s market of potential customers is, what it has that can set it apart from competitors, and also how healthy its finances look.

I then consider its valuation. Is the company selling for markedly less than I think it is worth? If so, I would consider adding its shares to my portfolio.

Rather than looking for long shots, my approach to aim for a million would be to stick to the proven and familiar. To reduce my risk, I would diversify across a range of FTSE 100 shares. But I think 10 blue-chip shares would give me enough diversification.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

C Ruane has positions in British American Tobacco P.l.c. The Motley Fool UK has recommended British American Tobacco P.l.c. 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.

More on Investing Articles

Investing Articles

2 lessons from the HSBC share price soaring 159% in four years

Christopher Ruane looks at the incredible performance of the HSBC share price in recent years and learns some lessons for…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

After a 2,342% rise, could this FTSE 250 stock keep going?

This FTSE 250 stock boasts a highly cash-generative business model and has been flying for years. Is it time to…

Read more »

Investing Articles

It’s up 70%, but the experts expect the IAG share price to climb still further

Why didn't I buy when I was convinced the IAG share price was likely to soar? And is there still…

Read more »

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

2 UK stocks with recovering profit margins

This writer considers a pair of UK stocks with very different share price trajectories following the pandemic. Would he buy…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Will Trump’s tariffs squeeze this FTSE 100 giant’s profits?

Our writer looks at how the latest news around US tariffs might impact FTSE 100 company Diageo. Should he be…

Read more »

Investing Articles

Up 95%, is this FTSE winner the best high-yield star for me to buy now?

Do we have to choose between share price growth and high-yield dividends? In this case, over the past year, it…

Read more »

Asian Indian male white collar worker on wheelchair having video conference with his business partners
Investing Articles

2 dividend-paying FTSE shares that could benefit from the AI revolution

Our writer examines two dividend-paying FTSE shares and explains some of the opportunities and risks he sees in their exposure…

Read more »

Investing Articles

Up 140% and rocketing out of the FTSE 250! Is it too late for me to buy this red-hot stock?

Miniature war games hero Games Workshop has outgrown the FTSE 250 and is hammering at the door of the UK's…

Read more »