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How long does it take to become a millionaire? Some people want to aim for a million as soon as possible. Sometimes, though, using time as an ally — not something to be fought against — can help someone move steadily towards their goal.
Here, for example, is one way someone starting from scratch this January could realistically aim for a million, by making regular investments in large, well-known, blue-chip businesses.
Taking the long-term approach
The maths are not complicated.
If somebody puts £20k a month into a Stocks and Shares ISA each year and compounds it at 10% annually, the ISA ought to be worth over £1m after 19 years.
So, starting today, they could be an ISA millionaire by 2045.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
The same approach could work with smaller contributions or a lower compound annual growth rate, but the timeline to aim for a million would be correspondingly longer.
In other words, this is a long-term approach to wealth creation — not some overnight get rich quick scheme!
Aiming to grow wealth over time
A 10% compound annual growth rate may not sound ambitious, especially as share price growth and dividends could both contribute.
But share price declines could eat into returns – and dividends are never guaranteed. 10% annually over a 19 year period is actually more ambitious than it may sound.
In today’s market, I do think it is possible. But it would require the selection of the right shares. That sounds obvious – but it is an important point.
Could this share be a part of a millionaire-making portfolio?
One share I think investors who want to aim for a million should consider is janitorial and catering supplies wholesaler Bunzl (LSE: BNZL).
Its recent record may not look inspiring, in fairness. The Bunzl share price has fallen 15% over the past five years, while the wider FTSE 100 index is up by 51% during that period.
One bright spot is the 3.6% dividend yield. Bunzl has grown its dividend per share annually for decades.
But, over the past five years, even taking that into account would hardly have got an investor close to the 10% annual target I mentioned given the share price fall.
Fortunately, past performance is not necessarily a guide to what to expect in future in the stock market.
The market has been punishing Bunzl, a long-time growth stock, for a lacklustre business performance over the past couple of years.
Back to the future?
There is a risk that could continue. Weak consumer demand could also hurt sales volumes of some catering disposables, like takeaway cutlery.
But I reckon Bunzl still has a lot going for it. It is solidly profitable. The company has a proven business model that has underpinned those decades of ongoing dividend growth.
The company expects moderate revenue growth this year. It has also been taking action on costs that it expects will “support a more stable profit outlook”.
With a multinational footprint and large customer base, I think Bunzl can bounce back and I have bought the shares with an eye on the long term.
