Want to aim for a million with a spare £500 per month? Here’s how!

Ever dreamed of being a millionaire? Lots of people would like to aim for a million – but putting that dream into practice is not necessarily an easy thing to do.

Even from a standing start, I think someone could try to aim for a million by drip feeding money into carefully chosen blue-chip shares on a regular basis.

Here’s how.

Being the tortoise not the hare

Some people have a fantasy about putting a little money into the stock market, finding a brilliant small company set to explode, then watching their investment soar in value.

That can happen – and occasionally it does. But a lot of small companies, even seemingly promising ones, end up going nowhere.

Rather than focusing on speed, I think an investor can focus on taking a realistic approach to investing by using a long-term approach based on finding brilliant businesses that have attractive share prices.

That way it may take many years to aim for a million – but hopefully it can be a realistic goal to aim for.

Building wealth over time

To put that into perspective, let me use a practical example.

Say someone invests £500 per month and compounds it at 10% per year.

How long would it take them to aim for a million?

After 30 years, that approach ought to have increased their portfolio to over £1m.

Choosing shares to buy

So yes, this is a long-term approach to investing.

But I see it as a practical one.

Still, is a 10% compound annual growth rate over the long term realistic? After all, dividends are never guaranteed and share prices can go down as well as up.

I do think a 10% compound annual growth rate is realistic, but it helps to focus on high-quality companies selling at the right share price.

For example, one share I think investors should consider is Ashtead Group (LSE: AHT).

At first glance, this might not seem too exciting: the company operates in the unglamorous world of plant hire and its share price has grown just 5% over the past year.

That pales compared to the 21% growth during that period of the FTSE 100 index, of which the company is a member.

But I think Ashtead has quite a few things going for it.

Demand for plant hire is high, due to large infrastructure projects and housebuilding. There are only a few sizeable groups in Ashtead’s key US market – and it is one of them.

The company has a proven business model, a clear strategy, and a sizeable client base.

Building can be a cyclical market. So any downturn in US construction could be a threat to revenues and profits for the company. But over the long term, I expect the business to perform well.

Getting started, today

If someone aims for a million, of course, they need a practical way to do so.

A useful first step can be selecting a suitable share-dealing account, Stocks and Shares ISA, or trading app for their needs.

After that, they can start to identify the sort of high-quality shares at attractive prices I mentioned above, as they aim for a million.

The post Want to aim for a million with a spare £500 per month? Here’s how! appeared first on The Motley Fool UK.

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C Ruane has no position in any of the shares mentioned. The Motley Fool UK has recommended Ashtead Group 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.

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