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Stop saving and start investing: how I’m targeting £500k in 2040

first_imgSimply click below to discover how you can take advantage of this. It’s the start of a new decade. I reckon it’s a good time to get rid of bad habits that might be damaging your health or your wealth. As this is an investment site, I want to focus on a problem that could be damaging your financial health. It’s called saving.You may think you’re being a good, responsible adult by putting some of your income into a cash savings account each month. If you’re saving for a rainy day fund, holidays, or a new boiler, then I’d agree. You’re doing the right thing.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…But if you’re saving cash to help fund your retirement, then I’ve got bad news. With best-buy Cash ISA rates hovering around 1.3%, you’re unlikely to hit your retirement goals. Here’s what I’d do instead.Mission possible: £500k by 2040?For the purposes of this article, I’m going to look at how you might build a £500,000 fund over the next 20 years. My choice would be to invest in the stock market using a Stocks and Shares ISA, or a pension. Which of these options is best for you will depend on your personal circumstances.Pensions provide valuable tax relief that will boost your contributions today. But your money is tied up until you’re 55, and you could face future tax bills. By contrast, investing in a Stocks and Shares ISA means all future capital gains and income will be tax free. And you can withdraw your money at any time.Option 1: buy the marketIf you want to build a £500k nest egg in 20 years, how much will you need to save each month? For a stock market investment, one option would be to ‘buy the market’ by investing in a FTSE 100 tracker fund. This will invest your cash in the 100 largest listed companies in the UK, so you’ll be invested in a wide range of businesses.Over the long term, the average annual return from the UK stock market is about 8%. Assuming this remains true, my sums show you’d need to save £850 per month for 20 years to hit your £500k goal. That’s quite a lot. Let’s see if we can find a way to reduce it.Option 2: buy stocksIf you invest in a smaller number of individual stocks, then you may be able to outperform the market. My sums show that if you can achieve a 10% annual return, your monthly payment could be cut to £658 each month.Beating the market isn’t easy. But if I was pursuing this strategy, I’d target a mix of value, income and growth. I’d aim to hold 10-20 stocks, split between the FTSE 100 and the FTSE 250.In the FTSE 100, I’d mainly be looking for high-yield dividend stocks which looked unloved and cheap to me. Current examples might include British American Tobacco, cruise firm Carnival and Royal Dutch Shell.In the FTSE 250, I’d be targeting firms with above average profitability and a decent track record of growth. For example, I might consider bus and train operator Go-Ahead Group, engineering group IMI, and financial trading firm IG Group.These are only initial ideas — you’ll need to do a fair amount of research. But I believe this approach could work well and help you build a valuable retirement fund. Image source: Getty Images. “This Stock Could Be Like Buying Amazon in 1997” Roland Head owns shares of Carnival, Go-Ahead Group, IG Group Holdings, and Royal Dutch Shell B. The Motley Fool UK has recommended Carnival and IMI. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee. Stop saving and start investing: how I’m targeting £500k in 2040center_img Enter Your Email Address Our 6 ‘Best Buys Now’ Shares Roland Head | Monday, 27th January, 2020 I’m sure you’ll agree that’s quite the statement from Motley Fool Co-Founder Tom Gardner.But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.What’s more, we firmly believe there’s still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.And right now, we’re giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool. Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge! See all posts by Roland Headlast_img read more

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