I’d aim for a million buying just a few UK shares

Can I become a millionaire by investing in stocks? The potential answer is yes, although it depends on how much money you have available to invest and what you do.

But instead of aiming for millions by buying dozens of different stocks and blindly hoping that one or two will do well, I’ll buy a few carefully selected stocks. Here is the reason.

Batting average

To understand this approach, let’s use a sports analogy. Legendary Aussie batsman Sir Don Bradman has the highest career test match average. He managed an incredible 99.94. The next best player, Adam Voges, managed 61.87. Four other players managed more than 60. In other words, many of the greatest test match players in history are within striking distance of one another – but Bradman is just ahead.

Does ‘The Don’ just have a special talent in test match cricket? Not. A similar pattern is also shown in first-class cricket records. There, Bradman’s batting average was 95.14. The next closest player – Vijay Merchant – averages 71.64, but hot on his heels is George Headley with a batting average of 69.86.

How can one player in a test match and first-class cricket beat another great player so dramatically?

Warren Buffett on fat pitches

One element to achieving a good batting average is playing to your strengths. This is also true for investments. As billionaire Warren Buffett explains using a baseball analogy: “The trick to investing is to just sit there and watch pitch after pitch and wait for the right one in the right spot..”

Can taking the Buffett approach help me make my way to millions? I think. As suggested, by not putting money into many good or good enough investment ideas, but waiting and investing in a few good ones, I should be able to increase my income – dramatically.

How I want to million

Like Buffett, I will ignore all stocks that are not in my circle of competence. If I can’t understand the company, I take an unnecessary risk by investing in it, no matter how high the potential reward may seem.

Buffett’s company Berkshire Hathaway have a stake in Bank of America, Bank of New York Mellon, Citigroupand US Bancorp, for example. Banking lies within the purview of Sage of Omaha.

Other than that, I will stick to what I know and can judge. Usually, I buy UK stocks in the chosen business sector.

I’ll also wait to see what Buffett has to say.”fat pitches“. This is a very interesting opportunity to help me achieve strong investment returns and increase my stock market batting average. That’s usually rare, so I’d put my money into some companies.

The impact on long-term investment returns can be dramatic. Imagine I invest £20,000 today into 20 stocks with a compound annual growth rate of 5%. After 25 years my portfolio will be over £78,000.

But what if I put the same money into just a handful of great shares with a compounded annual growth rate of 15%? After 28 years, I will have a seven-figure portfolio. So by finding great stocks that are selling at attractive prices, I’m aiming for millions!