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How long does it take to become a millionaire? Some people want to aim for a million as soon as possible. Sometimes, however, using time as an ally — not something to be fought against — can help someone move forward toward their goal.
Here, for example, is one of the ways that a beginner this January can aim for a million, by regularly investing in big, well-known, blue-chip businesses.
Taking a long-term approach
The math is not complicated.
If someone puts £20k a month into a Stocks and Shares ISA each year and compounds it at 10% a year, the ISA should be worth more than £1m after 19 years.
So, from today, they can become an ISA millionaire by 2045.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.
The same approach can work with smaller contributions or with a lower compounded annual growth rate, but the timeline for the million target can be similarly long.
In other words, this is a long-term approach to wealth creation – not some get-rich-quick scheme!
Aiming to increase wealth over time
A compound growth rate of 10% per year may not sound appealing, especially since stock price growth and dividends can influence both.
But falling stock prices can eat into profits – and profits are not guaranteed. 10% annually over a 19-year period is actually more ambitious than it sounds.
In today’s market, I think it’s possible. But it will require selection of the right stocks. That sounds obvious – but it’s an important point.
Can this share be part of a millionaire portfolio?
One stock I think investors looking to make a million should consider is retail and food stocks Bunzl (LSE: BNZL).
Its recent track record may not look encouraging, to be fair. Bunzl’s share price has fallen by 15% over the past five years, and broadly FTSE 100 The index rose 51% during that period.
Annual yield of 3.6 %. Bunzl has grown its dividends per share annually for decades.
But, over the past five years, even considering that would not have gotten the investor anywhere near the 10% annual goal I mentioned given the decline in stock prices.
Fortunately, past performance is not a guide to what to expect in the future in the stock market.
The market has been punishing Bunzl, a long-term growth stock, for poor business performance over the past few years.
Back to the future?
There are risks that could continue. Weak consumer demand could also hurt sales prices for other disposable food items, such as takeaway cutlery.
But I think Bunzl still has a lot to do. It is strictly profitable. The company has a proven business model that has supported those decades of steady dividend growth.
The company expects moderate revenue growth this year. It also took action on costs that it expects to “to support a stable profit outlook“.
With an international history and a large customer base, I think Bunzl can go back and buy shares with a long-term view.
