How I’d aim for a million by investing £25 a day in shares

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The idea of becoming a millionaire holds a lot of appeal for many people. A million pounds may not be worth what it once was – but it is still a substantial sum.

Rather than trying to aim for a million with some hare-brained scheme, I would take a methodical, long-term approach to such a goal by investing regularly in shares.

Putting aside some money every day

If I put aside £25 a day, that would add up to around £750 each month to invest. Over time, hopefully, that money could itself earn money, for example if I earn dividends from shares I buy.

I would keep saving daily. That would help lay the foundations for my long-term financial success. And although £25 a day is a lot to save, I think if an investor seriously wants to aim for a million, it takes effort.

Building a buy and hold portfolio

The basis of my plan would be to invest the money in shares. I would not try to exploit short-term price movements the way a trader does. Instead I would adopt the approach of a long-term investor.

This means looking for shares I think offer me outstanding value relative to their long-term prospects. That way, I could hopefully let time show the quality of the companies in which I invested.

Most important, I would focus on large, well-established companies with proven business models and a track record of profitability.

Going for growth?

That would knock some early-stage growth companies out of my reckoning. But if I wanted to, I could still base my portfolio on growth companies that met my investment criteria, like Google parent Alphabet.

Or I might invest in income picks such as Direct Line and compound the dividends year after year. Rather than make a choice between the two approaches, I could also opt for a blend of growth and income strategies.

Whatever I chose, I would keep my portfolio diversified to reduce the impact if one of the shares I owned performed poorly.

I’d aim for a million!

Imagine I aimed for a 10% annual increase in the value of my existing shares before considering the new money invested, either from share price growth, dividends, or a combination of both. That is aggressive but I see it as achievable. Direct Line, for example, currently has an annual dividend yield of 11.1%.

To aim for that million pounds means if I managed to get a 10% annual return I would hopefully hit my target after 26 years.

Not only that, I might earn a sizeable passive income if I chose. For example, after 26 years if my portfolio was earning a 10% dividend yield and I decided to start taking that as cash instead of compounding it, I could earn £2,000 every week on average in dividends.

So I think that could be worth me putting aside £25 each day in a share-dealing account, starting today!

The post How I’d aim for a million by investing £25 a day in shares appeared first on The Motley Fool UK.

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Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. C Ruane has positions in Direct Line Insurance. The Motley Fool UK has recommended Alphabet (A shares) and Alphabet (C shares). 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.