If an investor has ever wondered how to turn steady savings into a seven-figure sum, the answer might be simpler than expected. By opening a Stocks and Shares ISA and committing to regular investing, it is possible to aim for a £2.1m portfolio in just 30 years.
The hardest thing for many would-be investors is simply getting started. However, it really doesn’t take too long. Opening a Stocks and Shares ISA with a major UK brokerage takes a matter of minutes, but it can deliver a lifetime worth of benefits.
Why a Stocks and Shares ISA? It’s because every penny that goes into the ISA is shielded from taxation. This means it can grow faster, and investors can withdraw a tax-free income from it.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Running the numbers
After opening an ISA, an investor may want to crunch the numbers and set some targets.
Suppose they begin with no initial lump sum but contribute £800 a month to their ISA. To keep pace with inflation and rising earnings, contributions increase by 2% annually. Assuming the portfolio achieves an average annualised return of 10% — broadly aligned with the long-term performance of global stock markets — the results are remarkable.
After 30 years, the total invested would be just over £389,000. However, thanks to the power of compounding, the portfolio could grow to more than £2.1m by 2055.
Time really matters
The key factor is time. Compounding delivers the greatest benefits when allowed to work over decades. And even modest annual increases in contributions can make a significant difference. The earlier an investor begins, the more years the money has to grow, reducing reliance on market timing or luck.
Of course, investing carries risks. Market volatility means returns will vary from year to year. Nonetheless, by maintaining discipline, reinvesting dividends, and allowing compounding to operate, an investor maximises the potential to build substantial wealth.
For those aiming for a comfortable retirement or financial independence, the journey to £2.1m could start with a single step — and a long-term commitment to investing.
A stock for the job
Typically, when starting out, it pays to strive for diversification as quickly as possible. That might involve investing in a fund or investment trust. But some investors may wish to head straight for individual stocks, and one I think should be considered is Melrose Industries (LSE:MRO).
This firm stands out in the FTSE 100 for its disconnected valuation versus its prospects. While aerospace peers like Rolls-Royce and GE trade at much higher multiples, Melrose’s forward price-to-earnings (P/E) is just 15.1, and its P/E-to-growth (PEG) ratio is around 0.75 based management’s target of over 20% annual earnings per share (EPS) growth through 2029.
The company’s moat is substantial. Through GKN Aerospace, Melrose is the sole supplier for 70% of its revenue, with entrenched roles in 90% of global commercial and military engines, often secured by long-term, high-margin contracts.
A key risk is supply chain disruption, which has forced Melrose to lower its 2025 revenue guidance from £4bn to £3.8bn. Ongoing delays at major customers like Airbus and Boeing continue to limit production and deliveries, posing a challenge despite Melrose’s strong aftermarket and diversified portfolio. Although, it’s worth noting that Boeing’s output has soared in recent months.
Despite this, I’m still very positive on the outlook and I’ve been adding to my position recently.
