I’d aim for a million buying just a few FTSE 100 shares

Can really make a million by investing in it FTSE 100 sharing?

Maybe, but it’s not a get-rich-quick strategy. Targeting a seven-digit amount takes time, as well as years of successful market returns. However, it is a worthwhile ambition – and one that I hope to achieve by 2023.

Here’s how I approached that goal.

The importance of investing

To target a £1m portfolio, I need to save. But where should I put my savings once I’ve amassed a decent pile of cash?

This is where the importance of stock market investment comes in. According to IG, the total annual return of the FTSE 100 index from its inception in 1984 to 2019 is 7.75% (reinvesting all dividends). Let’s compare the effect that has on yield in cash of, say, 3%.

If I start with a lump sum of £10,000 and add £10,000 a year to that sum, this is what I get, accounting for two different compound annual growth rates.

	3% CAGR	7.75% CAGR
1 year	£10,304	£10,803
5 years	£64,751	£73,417
10 years	£128,352	£166,733
20 years	£288,051	£506,089
30 years	£503,541	£1,240,861

This shows the strength of the compound back. Taking the historical average of FTSE 100 shares, I will secure a double return at 3% cash yield.

There are limitations to this analysis. First, past performance does not guarantee future results. It also does not take into account the erosion of inflation in the real value of this amount – £1.24m will likely be worth less in 30 years from today.

However, in order to secure my £1m portfolio, I had to take some risk by investing in shares.

Buy some FTSE 100 shares

So, are index funds your best bet?

Well, I think it’s better than cash, but I think with some good stock options I can beat the average return of Footsie.

For example, in AstraZeneca The share price has doubled over five years, and it is up 20% on a 12-month basis. Pharmaceutical giants benefit from non-cyclical demand for medicines and I think they can continue to outperform the FTSE 100.

Another save I like is Scottish Mortgage Investment Trust, which invests in global growth stocks. It has recently fallen, down nearly 30% over the past 12 months, but 2023 could provide some opportunities to buy cheap shares in this innovation-focused fund.

Finally, British American Tobacco also looks attractive to me. Although the share price has fallen 1% over the past year and is down 34% over five years, the 7% dividend yield compensates for this.

With the same basket of stocks as above, imagine that I generate a 12% return on my holdings. Then the real magic of the compound returns to be clear.

	12% CAGR
1 year	£11,157
5 years	£80,279
10 years	£201,786
20 years	£755,065
30 years	£2,488,681

Of course, there are risks to this strategy. My portfolio will be less diversified at the expense of seeking higher growth. In addition, my stock selection could be poor, which would delay my progress to a million dollar portfolio or even send it to reverse.

However, achieving millionaire status by buying some FTSE 100 shares is a real possibility in the long term. I hope one day I can make it a reality.