With summer in the air, Christmas may seem far from most people’s minds. Indeed, while lots of us begin each year resolving to start investing in the stock market, by the time we hit the middle of May, other priorities have often pushed those good intentions to the back of their mind.
Still, that could be a lost opportunity. So if someone was to start investing now with £18 a day, what sort of portfolio might they have built by the time December rolls around once more?
Starting now, for the long term
Starting today, there are 223 days left before Christmas. So if someone starts investing £18 a day this weekend, they could have accrued over £4,000 by Yuletide.
That is quite an impressive figure, in my view, as it shows how relatively modest but regular contributions can soon add up.
Plus, that is only the start. I am a believer in long-term investing that stretches across years or decades, not just months. That £18 a day for a decade would add up to over £65k someone could invest in the market.
What’s a reasonable return?
Back to the short-term example though, to demonstrate how starting now could already mean making waves by Christmas.
Putting the money in is one thing, whether through a share-dealing account, trading app or Stocks and Shares ISA. But the reason people start investing in shares (instead of just using a Cash ISA or building society account, for example) is often because they hope to get an attractive return on their money.
That could consist of dividends, which some shares pay, and capital gains. Then again, shares can fall in value, resulting in capital loss.
The savvy investor starts as they mean to go on: focused on a balance of potential reward and risk that meets their own objectives, ability and comfort level.
Still, I think a reasonably good investor who takes risk seriously ought to be able to target compound annual growth rate of at least 5% over the long term.
Starting now, with an eye on the future
That does not mean by Christmas someone who starts investing today will have 5% more than they invest. That is an annual number, after all – and there is no guarantee that they will hit it.
What might it look like over the long term? Putting in £18 a day and compounding the portfolio annually at 5%, after a decade it ought to be worth around £84,530.
One share to consider this month
Back to today! One share I think someone who wants to start investing now should consider is consumer goods maker Reckitt Benckiser (LSE: RKT).
Its 31% share price fall in five years may look alarming. Indeed, some of the risks that have pushed the price down remain, such as litigation risks connected to past product liability. But the price fall has pushed the share cost down to around 9 times earnings.
I see that as an attractive valuation for a blue-chip company that owns well-known brands such as Dettol.
I also like the 4.7% dividend yield. Reckitt is a FTSE 100 share but that yield is around one and a half times as good as the FTSE 100’s overall yield.
