Buying and holding UK shares for the long run can help investors build some substantial wealth. Even when only putting £100 into the stock market each month, it’s possible to grow a pretty impressive nest egg to retire on.
In fact, if investors start early enough, this could transform into a £600,000+ portfolio generating over £25,000 passive income!
Turning £100 into £600k
On average, the UK stock market’s delivered annualised returns of around 8%-10% a year. The FTSE 100‘s historically offered the lower end of this range, with the FTSE 250 tending higher. Yet, this higher performance has also come paired with significantly more volatility.
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Nevertheless, when maximising returns is the priority, sticking with the UK’s flagship growth index makes more sense. So how long would it take to transform a £100 monthly investment into a £600,000 portfolio at a 10% annualised return? The answer – about 40 years.
| Years | Invested Capital | Portfolio Value |
| 5 | £6,000 | £7,744 |
| 10 | £12,000 | £20,485 |
| 20 | £24,000 | £75,937 |
| 30 | £36,000 | £226,049 |
| 40 | £48,000 | £632,408 |
Given that the average length of a career is around 45 years, putting aside £100 a month might be sufficient to open the door to a slightly earlier retirement. And by following the 4% withdrawal rule, investors could also continue to earn a £25,300 passive annual salary.
That’s terrific news for those who’ve just started working. But less so for those who’ve already been at it for a while and haven’t started putting money aside. Even more so considering that the process of building a £600,000 nest egg might end up taking even longer than expected. After all, just because the FTSE 250 has delivered near 10% returns in the past doesn’t mean it will continue to do so in the future.
So besides simply injecting more money into UK shares, how can investors still reach the £600,000 threshold on a shorter timeline?
Seeking higher returns
While the London Stock Exchange has a reputation for conservative investing, there are still plenty of high-growth opportunities for investors to capitalise on. One such example from my portfolio is Alpha Group International (LSE:ALPH).
The currency risk management and alternative banking company has been on quite a rampage over the last five years. In fact, the fintech stock’s doubled. Zooming out to its IPO in 2017 reveals a massive 770% total return for shareholders.
That means over the last seven years investors have reaped a 33.9% annualised return. And if £100 was invested each month at this rate, the journey to reaching £600,000 would take around half the time.
Sadly, this level of gargantuan growth’s pretty rare and isn’t likely to be sustained over the next decade-and-a-half. After all, Alpha Group’s now a £890m market-cap company. And while I remain optimistic about its long-term potential despite the risks and challenges it faces, expecting a near-34% annualised return is just unrealistic.
However, it goes to show that by picking individual stocks rather than mimicking an index, some tremendous market-beating gains can be achieved. And by hunting for Alpha-like UK shares, the journey to £600k could be significantly shortened.
In fact, even if only an extra 2% above the FTSE 250’s historical average is achieved, that’s still sufficient to wipe out five years from the waiting time.
