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How to become a millionaire and also stay one

“Who wants to be a millionaire?” probably quite a few of us actually! Many people don't know that there is a proven way to get there over the long-term. You do need patience on your side though and "no" it doesn’t involve "phoning a friend" to get their idea on what the answer is. The truth to millionaire success is in regular investing in the stock market over the long term and taking advantage of the power of compound investment growth. Here we explain all in simple terms with zero jargon.

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For starters, what on earth is compound investment growth?

You may have heard about compounded interest or compound investment growth? This theory around investing is often understood by few of us and is regularly over complicated by those in the know. Understanding compounded growth will help you to see how you can grow your wealth. We like to use the analogy of a snowball when explaining compound growth. You are at the top of a mountain and in deciding to have a snowball fight you start to create a small snowball in the palm of your hands. On throwing it the snowball has very little impact so you decide to roll a fresh snowball down the mountain so that it picks up more snow as it turns. The snowball gets bigger the more snow it collects, this snowball could be turned in to a pretty good snowman! When it comes to investing your pot of money might feel small at the start, it could be £1000 just to start with. Whilst it might start off a small amount as it earns interest, the investment and the added interest, earns more interest. Just like the snowball.

Let’s look at a practical example:

Year One: let’s say you have £10,000 invested in the stock market, if we assume that money grows by 5% over the course of that year, by the end of year 1 you would now have £10,500 invested.

Year Two: In the second year if we assume another 5% growth on your money that stays invested, you don’t just get 5% growth on the original £10,000 that you put in but also the extra £500 that you made from year one’s interest. So that is 5% growth on £10,500. By the end of year two, your money grows to £11,025.

This is the magic of compound investment growth, your money can continue to work for you as you benefit from this “snowball effect” over time.

You can use a compound investment growth calculator to see how this plays out over time. I have run my own scenario, using my own assumptions, for the purposes of this article. But, if you wanted to run your own scenario using the compound growth calculator that we have made here at Unividual, then feel free to give it a go. You can also use this to plot your own compound interest over time as you invest.

Starting your journey to becoming a millionaire

So, I want to show you how someone, at the age of 22 just starting out, can become a millionaire before they are 60 years old.

So we take an example of someone graduating from university or finishing an apprenticeship, as they settle into a new career at age 22 they are able to regularly save £100 into the stock market every month. If you are unsure if you can afford to save that amount take a look at our  Guide to Managing your Money in your 20s and 30s. For this example I have assumed that as someone’s salary increases they choose to spend some of that money on increasing their savings contributions so every 5 years this person increases their regular monthly contributions to the stock market by £100.

Next, I needed to assume an average annual growth rate for the chosen investment. Now, your average annual growth rate will largely depend on how much risk you’re willing to take with your investment money. It is also important to know that the stock market doesn’t just go up in a straight line over time, there will be volatility along the way and there will be good years and bad years. However, we can take all those good years and bad years together, to get the annualised average growth rate, and we can use past data for this. Let’s assume that this person invested in the S&P 500, which is a collection of the 500 largest publicly-listed companies in the US. From 1957, when all 500 companies were incorporated into this index, to December 31st, 2022, the average annualised return in the S&P 500 was 10.13%. This assumes that all dividends received were reinvested. Whilst past performance can’t accurately predict what will happen in the future, I have used this average annualised growth rate of 10.13% in my calculation.

That is the really geeky bit so if you are feeling lost stick with me, I just like to explain how I came about my calculations. So now for the interesting part, this would leave that person with £1,080,956.94 invested by the time they turn age 59. The best part is that person only would have invested £187,200 in total. Compound growth did the rest of the work!

Now your journey will be unique, you might be in your 30s and 40s, you might have built up some wealth, you might not have anything at all. This is just an example to inspire young people to save more and realise they can control their destiny to some extent. But this is where tailored financial advice can become your secret weapon. This is what I love and am so passionate about, taking someone and all their ideas and dreams and turning it in to a reality with a solid well-thought through plan that can adapt and mould around life’s difficulties and trials and tribulations. So, if you are older, don’t be put off, it is never too late to get started, you might just have to work a bit harder, but you know what you won’t have to work as hard as someone who does nothing at all.



Using the 4% rule: make your investments last over time

The next part of the plan is probably even more important. Now we have made a million, let’s not spend all that money at once now. Ideally, we want to withdraw from our investments in a way that’s sustainable, so that the pot doesn’t run out too quickly. We can do this using the 4% rule.  So, what is this “4% rule?” In theory, 4% is the amount that you can withdraw from your investment pot each year, without running the risk of completely depleting your portfolio, and outliving your money. This is because if you only take 4% income each year most of your money is left invested and can continue to benefit from compound investment growth over time. As an example, a person with £1,000,000 invested could take £40,000 “passive income” each year, without the pot running out while they are alive.  If this money is withdrawn from a pension, a Chartered Financial Planner can help you minimise tax on this passive income, depending on your income tax status in retirement. If this money is withdrawn from an ISA, then, even better, the passive income could be withdrawn 100% tax free.

What is your definition of retirement? Dull and boring or freedom to do what you want?

You now have a pot of money that, in theory, should last you for the rest of your life and you can withdraw from this pot for whatever you want. My definition of retirement is having the financial freedom to do whatever I want, whenever I want. I could fully stop work at this point and become a full-time traveller. Or more likely, I could use this financial freedom to start up something new, turning a side hobby or a passion into a fun retirement business. “Retirement” for me then starts to feel like something that’s exciting to work towards, rather than something that feels a along way away, that’s dull and boring. Depending on the amount that I’m prepared to invest each month, and the investment risk that I’m willing to take, retirement and financial freedom could happen for me sooner than when I am in my 50s or 60s. The sooner I get the power of compound growth working for my clients the better.

What is it like to be a new investor at Unividual?

Hear from Max one of my most recent clients who has just started their journey in the investment world. “I recently started a business relationship with Unividual and primarily my chartered London financial adviser Alex Caswell. I can thoroughly recommend him and Unividual. As a new investor he has made the process incredibly easy and enjoyable, spent many hours researching and discussing options with me and always available. Would certainly recommend to friends and family.”

You can see Max’s original review on Google here

Investing is scary - we get it

Look we get it, investing is scary. It can be common to bury your head in the sand, choosing to avoid doing anything with your finances at all but building a financial plan of longevity will make you more resilient throughout life and more prepared for the hurdles ahead. Plus you can still plan for the future whilst living for today, we advocate for that massively.  When we all start thinking about managing our money we don’t understand how to manage the risk or our own emotions around investing. Some people start off using robo-investment platforms or investing themselves without advice, also known as DIY investing. This is because a lot of people can’t find a financial adviser that represents them and our industry gives off this perception that you have to be rich and wealthy to need a financial adviser. Well you don’t, actually the cost of financial advice is more affordable than what people realise. At Unividual financial advice isn’t just for the rich and famous it is for all of us. So, if you are intrigued to get started take a look at some of our resources below or feel free to get in touch to find out more.

Whether you are just starting off in your life and want to build your millions or you have already saved up throughout your lifetime and want to drawdown income I am here to support you with your next steps. We can start off having a coffee, get on a video call or if you want to get started we can arrange a free first meeting, where we can talk about what financial freedom means to you, and how Chartered Financial Planning can help you get there.

In the mean time just remember you can save and still enjoy today, do a bit of both, and if you have questions you know where I am!


When you are ready, I will be here for you

Check out our guide to investing and find out more about financial planning in our ultimate guide to financial advice.  It is also really useful to read about how financial advice has had a real impact on clients, so head over to some of our case studies here.


Author: Alex Caswell, Chartered Financial Planner

Editor, Cherie-Anne Baxter, Marketing Director

Date: 30th May 2023

The contents of this article are only accurate from the date that it was written or updated

The value of investments and the income they produce can fall as well as rise. You may get back less than you invested.


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