How much time and money does it take to become a stock market millionaire?

Deflation means that a million pounds is worth less in real terms than before. However, many people who invest in the stock market like the idea that if they succeed, they might become millionaires.

It is possible. Indeed, some people have even built up their own Stocks and Shares ISA for seven figures.

So, what would it take?

Three important changes

There are three factors that determine the answer. How much is invested, at what annual growth rate, and for how long?

Let’s say someone invests £500k and earns a compound annual growth rate of 8%. It will take nine years to reach the £1m mark.

Changing one variable affects the others.

For example, if the investment is £100k, not £500k, the timeline increases from nine to 29 years.

Every investor is different

I see an 8% compounded annual return as challenging but attainable in the long run if the investor focuses on buying quality stocks without overpaying for them.

Different people take different approaches when considering the time frame for their investments. I think about the stock market from a long-term perspective.

So, imagine that the period is 25 years and you stick to an 8% compound annual growth rate.

Investing £1,100 a month (less than £255 a week) should be enough to hit the £1m target in that time.

Continuous investment with a cost perspective

A regular drain fee can be a financial help.

The shares purchased will be the most important in determining the return, but they can also be affected by the costs and expenses.

So it makes sense to take the time to compare the different options for share trading accounts and Stocks and Shares ISAs.

Some investors may decide to use a Self-Invested Personal Pension (SIPP). Because of the tax relief, that could allow them to pay £1,100 a month into a SIPP without having to come up with that much themselves.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Looking for millionaires

I mentioned that picking the right stocks is important.

Last week I added to my current holdings a company that I feel is looking very undervalued: a US food maker This is Campbell’s place (NASDAQ: CPB).

Although it has dropped the reference to soup in its company name, I see the soup business as having the potential for a strong long-term appreciation of the company’s brand and association with soup.

As the name suggests, the company also wants to grow other businesses, such as cooking sauces and biscuits.

So far the results have been mixed. Sales are declining and I see a risk that the company’s portfolio of processed foods may continue to lose appeal as consumers become more health conscious.

However, I think the decline in the stock price has gone too far.

The long-established company now trades at just 11 times earnings. It also has a good yield of 7.5%.

Is that possible? Yes – any dividend can.

But, promisingly, it is fully integrated. Campbell is a very profitable business.

I see it in a state of disrepair, not a structural decline. Twenty-five years from now, I expect Campbell’s stock price to be higher than it is today. Currently, I am getting 7.5% yield from my crop.