I’d aim for a million, investing in just a handful of FTSE stocks!

At FTSE does not reward investors in 2022. Stocks, except those in the resource sector, are down.

But I’m looking for a long-term investment as I try to turn my savings into £1m. This is the kind of money that could help me retire, or even allow me to retire early.

So how can you turn your £10,000 start-up capital into £1m?

Slow and steady

I can invest in promising growth stocks and hope to see the envisioned growth come to fruition. However, most growth stocks fail. So, this can be a high-risk strategy.

However, I prefer a slow and steady approach. I use a compound generating strategy. This is the process of earning interest on my interest. And the longer I do it, the more profitable I get.

I am targeting 10% annual growth every year. Much of that comes in the form of dividends. So, if I will invest £10,000 and get 10% annual growth, after the first year I will have £11,000.

That’s good, but the compounding strategy produces a snowball effect. The longer I was able to leave it, the more it grew.

If I don’t withdraw for 35 years, at the end of that period I will have £325,000.

Now, this isn’t millionaire status, but it does highlight the compounding return effect I could have on my investment, turning £10,000 into £325,000.

Invest regularly

If I want to make the final pot bigger, without contributing the initial capital, I have to invest regularly.

So, if I start by adding just £120 a month, then add 5% every year, it will have a huge impact in the long run.

In fact, after 35 years of contributing while reinvesting the dividends, I will have £1.07m. This is a figure I can achieve and can help me retire early.

Choose wisely

In theory, the above sounds good. But the hardest part is picking the right stocks.

I need a company that rewards its shareholders with dividends, and I need to know that those dividends are well supported. So, I can see the dividend coverage ratio.

I recently topped up on it Lloyds share and it is among the top choices now. The discounted cash flow model shows that it is undervalued by around 45%, and the dividend yield is around 4.3% – analysts see the dividend increasing by 25% in 2024. In 2021, the dividend coverage ratio is 3.8 – whatever is above the two considered safe.

Other options will Greencoat UK Wind, which I recently invested in. The trust offers a 4.8% yield and has achieved an annualized share price growth of around 5% over five years. The fund should benefit from the trend towards greener energy, and increase the efficiency of renewable technologies.

In the near term, higher energy prices increase Greencoat’s financial flexibility. By 2022, the trust will reduce its debt by £50m and invest in the Hornsea 1 project – the world’s largest wind farm.

And, instead of spreading my bets, I prefer to pick a few stocks that I strongly believe in, taking a lead from Warren Buffett.