The UK stock market has had its ups and downs of late. But I think that helps investors chasing a million in their Stocks and Shares ISA accounts. Let me explain why.
I know people who happily spend £50 and more on a night out, every weekend. If it’s what they enjoy, that’s great.
Little and often
But £50 per week transferred to a Stocks and Shares ISA is £2,600 per year. That’s way short of the annual £20,000 limit. But I think a lot of people would be surprised how much it could turn into, invested in shares over the course of a lifetime.
In recent decades, the UK stock market has been returning around 8% per year. To turn £50 per week into a million, it would take 45 years at that rate. It might sound like a long time. But young investors starting today could surely achieve it by the time they retire.
And investors who can steadily lift the amount they invest over the years could bring their retirement day ever closer with every increase.
Energy prices have gone through the roof, and the cost of living is soaring. And that means many of us really don’t have much spare cash right now.
So it might seem a bit unfeeling of me to be shouting: “Hey, let’s invest all our cash in the stock market.”
But here’s the thing. Whatever we can afford to invest today, however modest, could do quite a bit better than in happier economic times.
Lots of people have withdrawn cash from the stock market, some to shore up their incomes, others to stick it in what they see as safer places.
Demand and prices
But shares are like anything else we buy and sell. When fewer people want to buy them, prices fall. And that means we can get more for the same money. See what I mean about market ups and downs working in our favour?
Plenty of seasoned investors have sold shares this year, and bought gold or other assets like that. That’s when shares are cheap, and I really don’t understand why they do it. To me, it’s like going to the high street sales and trying to sell your stuff back to them at the new lower prices.
I don’t know about everyone else, but I prefer to buy shares when they’re low and sell when they’re high. A short-term outlook can easily lead investors to achieve exactly the opposite.
Future stock market returns are obviously uncertain and unpredictable. But for more than a century, the British stock market has wiped the floor with other forms of investment — provided investors are in it for the long term.
Share prices are depressed in 2022, with plenty of fat dividend yields out there. And that makes me think it’s an unusually good year to start investing in a Stocks and Shares ISA.
Yes, I know money is tight right now. But, perhaps unfortunately, times like these are usually the best times to pick up bargains.
Starting again today, I’d definitely be putting as much as I could in a Stocks and Shares ISA, to try to make a million by retirement.
The post I’d invest £50 a week in a Stocks and Shares ISA to try to make a million appeared first on The Motley Fool UK.
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