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How to build a £1m portfolio by the time you retire [in 3 easy steps]

By Stuart Ritchie - January 21, 2020

One of the most common excuses for not investing more money on a regular basis is “I can’t afford to”.

You simply don’t have enough spare money.

It’s not just those on modest means who say it.

We’re all prone to spend more than we should.

The National recently asked me to comment on this topic. 

If building a fund worth £1m is within many ordinary people's reach.

Yes, I believe it is. 

Provided you have time, get down to the task and stick with it...

You can make it happen.

Here's how...


1. Develop strong, healthy, and effective money habits

Financial author and speaker Jason Butler says, in his experience, it’s our everyday spending habits that are chiefly to blame.

All those small things add up.

Three coffees a day on contactless.

Buying a mobile phone on a contract for £75 a month when you could buy a six-month-old one for a couple of hundred pounds....

It’s these choices and habits that when compounded daily...

Stops you being able to save.


2. Increase your monthly contributions by 3% every year

The good news is that salaries and bonuses typically rise every year.

A good discipline is to commit to investing more whenever your income increases.

And not justify extravagant or unnecessary spending based on emotions.

So, what if you ARE being smart about your spending, and still want to invest more money?

Then you must look at your income.

As yourself, “can I afford this job?”

In other words: what is my desired lifestyle, including making provision for my future self, and what is the right job for that?

From there, you can work out a plan to make up any shortages.


3. Start now

In simple terms, if you invested £500 a month from the age of 25, and your money grew at an average rate of 7 per cent a year after charges, you would have £1.28m by the age of 65.

So how do you do that?

Keep things simple.

Choose low cost, globally diversified index funds and leave alone.

(Apart from rebalancing once per year).

Putting enough money away regularly is essential if you want to be comfortable in retirement.

Whatever it is that’s stopping you doing that, you need to address it without delay.

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