Given that 4,000 Britons have become Stocks and Shares ISA millionaires, it isn’t an impossible target to aim for.
In fact, it’s becoming easier. Many of those investors built their pots at a time when the ISA allowance was just £7,000 a year. Today, it’s £20,000.
I can’t afford to invest anywhere near that much each year, but according to my sums, I don’t have to. It’s possible to do it by investing as a little as £6.86 a day, which is just over £208 a month.
I can make a million from the FTSE 100
The FTSE 100 index of blue-chip stocks has delivered on average total return of more than 7% a year over the longer run. I’ll try to improve on that, by building a portfolio of shares I hope will beat the index, although there are no guarantees. There never are when investing.
I’m not expecting to make an overnight fortune. The best way to get rich from shares is slowly, over decades. My table shows how my £6.86 a day rolls up over time.
Time
7% a year total return
9% a year total return
5 years
£ 18,927
£ 20,195
10 years
£ 41,961
£ 47,414
20 years
£ 119,576
£ 153,729
30 years
£ 272,257
£ 405,416
40 years
£ 572,602
£1,001,251
The longer I invest, the better. That’s an obvious point, but the process is quite spectacular. In the first 10 years, my pot increases by £41,961, assuming a 7% return. In the final 10 years, it grows by £300,345. That’s because I’m generating growth upon growth.
Upping my return by just 2% a year has an outsized impact. Over 40 years, it gives me an extra £428,649. That turns my £6.86 a day into just over £1m. Not that any of this is guaranteed, of course.
As a benchmark, a Cash ISA paying 3% a year would take 85 years to make a £1m. Sadly, I won’t be around to enjoy that moment.
Bunzl’s smashed the index
I’d aim to beat the FTSE 100 by investing in stocks with terrific track records of outperformance, such as the hugely underrated Bunzl (LSE: BNZL).
Bunzl knuckles down to the unglamorous task supplying everyday items to other firms, such as disposable coffee cups, cleaning materials, and bandages and rubber gloves for hospitals. It’s grown rapidly by snapping up smaller rivals. In the year to August, it spent more than £650m on acquisitions. That’s par for the course for Bunzl.
The Bunzl share price is up an impressive 71.84% over five years and 21.59% over the last 12 months.
While the yield looks relatively low at 1.96%, don’t be misled. Bunzl’s a true Dividend Aristocrat, having increased shareholder payouts every year for the past 31 years. Only last month, the board hiked the interim payout by an impressive 10.4%.
Every stock has risks. Bunzl’s exposed to cyclical sectors of the economy, which could struggle if the US falls into recession. The shares are a little expensive, trading at 18.88 times earnings, and could fall if results disappoint.
A spread of around a dozen FTSE stocks like these could make me an ISA millionaire. I’ll consider Bunzl when I have the cash to spare and, with luck, I’ll be a millionaire in less than 40 years.
The post How investing just £6.86 a day could make me a Stocks and Shares ISA millionaire appeared first on The Motley Fool UK.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl Plc. 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.
