Is it possible to become a millionaire (or near to) through investments?

Million$baby

I am not talking about the already wealthy who can invest 100's of thousands of £, but the man on the street who doesn't have much money to his name but wants to invest wisely and make big returns? Can you share your knowledge on people who may have invested modestly and with a bit of know how and risk taking have become financially well off through smart investments. Investing is a subject i am very interested in, but it can also destroy a person if they are not knowledgeable.

jimjames

Yes you can. Start early, keep investing and reinvest dividends and over time you'll be over a million.

talexuser

People who invested the max every year since the very start of Peps and Single Company Peps before they became ISAs were millionaires if reinvesting dividends quite a few years ago as reported in the press, with all the income now tax free.

For this reason I think eventually the government will almost certainly have a lifetime limit on the amounts in ISAs (like pensions), when enough people are not paying substantial tax on the income.

Glen_Clark

Its possible to become a millionaire by investing a pound in the Lottery. But the only sure way to make money out of the stockmarket is by investing other people's money (eg. fund manager) so you take a share of the profits, whilst they take all the risk of losses.

_CC_

If you have a decent enough job and invest for the long term you could easily achieve £1m, although obviously £1m a few decades in the future won't be worth anything like the same as £1m today.

For those with little money to put aside, I doubt it - you'd have to have pretty unrealistic returns. It would be far more realistic for said person to start up a successful business and achieve it that way, probably have more fun too.

eskbanker

To borrow the quote from Richard Branson, another route to becoming a millionaire is first to become a billionaire, and then start an airline....

System

You can exchange some pocket money for Zimbabwean currency, then you'll be a millionaire

BananaRepublic

I am sure it is although you will need to invest quite a lot of money or live a long while. Some markets have shown astonishing growth, such as China, and yet they have also shown astonising shrinkage, so you can just as easily lose as win with volatile investments. If you had picked Microsoft and Appple shares, you could have become a millionaire. Investing £3000 in the Apple IPO would have netted you about £1,000,000 today. However the chances of picking the right company are low. Some people make a living from investing in startups, knowing that most will be dogs, but enough will pull through to cover their losses and make a profit.

Many people have become millionaires from buy to let. In the past you could get a house for small money, and after a few years of letting it out, get another house for small money, and so on. However, these days you need more money as a deposit before you can get a mortgage, typically 25%, and George Osborne is making BTL less lucrative by reducing tax breaks.

Sam_J12

If a 30 year old invests £500 per month and the stock market gives an annualised return of 8% then by around 65 these investments will be worth about £1m. Of course, £1m will be worth a lot less then!

jamesd

Million$baby wrote: »

I am not talking about the already wealthy who can invest 100's of thousands of £, but the man on the street who doesn't have much money to his name but wants to invest wisely and make big returns? Can you share your knowledge on people who may have invested modestly and with a bit of know how and risk taking have become financially well off through smart investments. Investing is a subject i am very interested in, but it can also destroy a person if they are not knowledgeable.

Yes. I may well get there in ten years or so, depending on investment returns. The first hundred thousand or two is hardest, as time goes by the compounding growth gradually takes over.

I've been working on it the aggressive way, investing more than 60% of (net pay plus gross pension contributions) over eleven years so far so might go from nil to a million in 20 years or so. I was helped by what have become higher than average income levels.

Someone who is less aggressive or with lower income can also do it, it just takes longer.

Here's how long it would take with average long term UK stock market growth less 0.25% fees for various monthly payments, all in today's money - that is increasing the million by inflation, as well as the monthly payment amounts:

£100: 78 years
£200: 65 years
£300: 56 years
£400: 51 years
£500: 47 years
£1,000: 34 years
£2,000: 24 years

Seems like too long and/or too much? Use pension contributions. Those add 25% to what you pay. even better the auto-enrolment rules in 2018 mean that you pay 5/8ths of the amount, multiplying what you pay by 1.6 times.

If you just want a million as a number, without adjusting that target or the payments by inflation it's significantly easier, 6.75% growth this time instead of 4.75, assuming 2% inflation. Also assuming auto-enrolment rules so what you pay is increased by 1.6 times.

£100: £160 going in. 54 years
£200: £320 going in. 44 years
£300: £480 going in. 38 years
£400: £640 going in. 34 years
£500: £800 going in. 31 years
£1,000: £1,600 going in. 23 years
£2,000: £3,200 going in. 16 years

The pension tax reliefs help a lot in this case, so does not increasing the million target by inflation.

i did cheat in this version. The auto-enrolment rules don't say it goes these Pound amounts, it's just mandatory to a total of 8% of eligible pay so you won't normally get 1.6 times on the higher amounts unless you pay is also high. Yet if salary sacrifice is used that does help because you save the employee NI and may get some of the employer NI, undoing some of that cheating. This doesn't change the overall picture, though: get started early and it's possible on average pay to become a millionaire buy state pension age through investing. Or sooner.

A person on average pay who's fairly committed can do it by state pension age without huge trouble. A more committed person can do it and retire earlier, though you don't need that much to retire early.

Getting started early and with as much as possible is hugely important, so you get the compounded growth for longer. The pension tax relief also helps, a lot. Use both things to get it done.

Scarpacci

To become a millionaire from investments is surely out of the grasp of most people without a huge dollop of good luck or rare skill. A relatively ordinary man could save enough that, over time, it can grow to over a million, but I think it would be unfair to credit the stock market with the entire effect of that. Yes, it is responsible for the compounding effect, but you can't ignore the importance of having earnt the money in the first place.

You don't have to be already wealthy and available to invest £100,000+, but you will need to have that sort of cash flowing in over time except in very rare cases where somebody does manage to strike it lucky.