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Build a million-dollar investment portfolio by 30

In today’s post, I’d like to pull together the threads from a number of recent podcast episodes and articles, to provide a guide on how to build a million-dollar investment portfolio. I’ll bring this to life with a real example of how I’ve invested in exactly this way for my nephew, and how he’s nicely on-track to having a million-dollar investment portfolio by the time he’s 30 years old.

These are simple steps that anyone can take, and that will make a material difference to the opportunities available to your child (or niece/nephew) by the time they’re thinking about starting their own family.

I’m not selling anything, there are no affiliate links in this guidance, and no bullshit. It simply takes time. And that’s something that your kids currently have an abundance of.

Step one – open a tax-efficient investment account

In the UK, there are many companies that offer a type of investment account called a “Junior Stocks and Shares ISA”. Money saved in a J-ISA (or an ISA, the version for adults) can be invested in stocks and shares, and as long the investments remain within the tax wrapper, they grow tax-free for life (and unless the tax rules change, that growth is uncapped).

J-ISA accounts from different providers are really all pretty similar. Fees do vary, but at the time of writing you’ll not go far wrong by opening an account in your child’s name with either Hargreaves Lansdown or AJ Bell You Invest:

https://www.hl.co.uk/investment-services/junior-isa
https://www.youinvest.co.uk/investing-for-children/junior-isa

If you’re not in the UK the same principles apply – there are almost certainly similar tax-efficient options available locally, but you’ll need to do your own research.

Step two – fund the account

You’re currently allowed to contribute up to £9,000 a year to a J-ISA account. If you start early enough you don’t need to pay anything like this number to make your child a 30-year-old millionaire, and most providers will allow you to open and top-up the account with as little as £25.

Money deposited into a J-ISA becomes the legal property of the child, but they can’t access it or withdraw it until they’re eighteen, and up until they’re sixteen the adult takes all the investment decisions.

If you want to accelerate your child’s savings, perhaps share this post with a grandparent or family member, and see if they would be open to making a regular or one-off contribution, to get the ball rolling.

Step three – invest the initial money (simple option)

Buy shares in an ETF that tracks the FTSE All World Index. An easy and low-cost way to do this is by buying Vanguard FTSE All-World UCITS ETF USD Accumulation (GBP), which trades under the ticker of VWRP.

I want to keep the guidance in this post very simple, so to explain in plain English what each part of that financial gobbledegook means:

  • Vanguard – this is the company that manages the fund, Vanguard is very established and very reputable
  • FTSE All-World – this is the index that the investment is tracking. The FTSE All-World index includes approximately 3,900 holdings in nearly 50 countries, including both developed and emerging markets. It’s a great way of getting diversification by just investing in one thing
  • UCITS – this tells us that the investment is well regulated, and adheres to a common standard for risk and fund management
  • ETF – our investment is an ‘exchange-traded fund’, this means that it’s traded on stock exchanges like any normal company stock, but it’s designed to mirror the performance of an index
  • USD – the fund is managed in US dollars, but that’s not relevant to us as we’ll be paying pounds on this version of the ETF
  • Accumulation – from time to time, some companies pay a dividend to shareholders – basically ‘cash-back’ to the investor. An accumulation fund automatically reinvests that money without you needing to take any action, so our investments will grow a little faster
  • (GBP) – this is the currency we’ll pay for the investment, Great British Pounds

If you’ve opened your investment account on Hargreaves Lansdown you can find the Vanguard ETF here, and the same investment is available on Youinvest here.

There are other indexes available with different collections of stocks or products, and some investors may hold a mix of different indexes, but if you want to keep this real simple, a decent option would be to invest all the savings in the one index I’ve suggested.

Step four – keep contributing (simple option)

Now your child could do very well if you just invested an initial sum of money, and then forgot about the account until they were eighteen. The FTSE All-World Index has averaged a return of 5% to 6% annually since its launch in 2000, and there are very good reasons to expect that in the long-term this growth will continue at the same rate. Some years it’ll be higher, some years it’ll be lower (or negative), but in the long-term you can reasonably expect to earn on average 5-6% for each year that you keep the money invested (and don’t forget that this growth compounds, so each year you earn a little extra – over a long timeframe, it really adds up).

Let’s go through a couple of examples to bring the numbers to life.

If you invest £1,000 for your child on the day they are born, and never add another penny, by the time they’re eighteen they’ll have around £2,700.

That’s decent growth, but it’s not the route to a million-dollar investment portfolio – so you’ll want to keep adding a little bit of money each month. If you start with the same £1,000 and can afford to add £25 a month, by their 18th birthday your child could reasonably expect a total balance of £12,000. If you can increase that to £100 per month, your child should have around £40,000 – now we’re getting there.

The whole key to building significant wealth is to put time on your side. The earlier you start, and the more you contribute in the first few years, the greater the end result will be. Don’t kill yourself by over-investing for your children, but at the same time recognise that if they have their own money when they’re getting into their twenties, they’ll be far less likely to be relying on the ‘bank of mum and dad’ – as the proverb goes, “a stitch in time, saves nine”.

I’ll just share one fairly minor complication that you need to be aware of when you’re making regular contributions, and this is to understand the dealing fees when you’re buying ETFs.

Hargreaves Lansdown will currently charge you £5.95 every time you trade, Youinvest will charge £9.95. It doesn’t sound like a lot, but these fees will really add up if you’re buying more of the ETF every month, so I would actually recommend that you hold the regular savings in cash (either in the J-ISA account, or parked in a regular savings account), and then invest on a less frequent basis.

Ideally, you want to reduce the dealing fee to under 2%, so let’s say that you aim to buy in batches of around £500; if you’re adding £25 a month, you can probably get away with doing a single trade once a year (perhaps on their birthday, to take advantage of any generous presents your children may have also received); and if you’re contributing closer to £100 a month you can probably trade twice a year.

Step five – “Don’t Panic”

This is probably the hardest step so far, but it only requires you to stick to the plan. In some years markets will be up and your child’s savings will be well on their way to a big number, and in some years markets will be down and they’ll have less than they had the previous year – but in those down years, when you invest new money you’re buying the index at a cheaper price – it’s win/win.

Don’t panic. Just keep contributing regularly, keep following the plan, and over the long-term those bumps in the road will even out.


Now I said above that steps three and four were the simple option. An astute reader is probably wondering what the more advanced approach would look like, so let’s get into that.

I should say up-front that this is entirely optional. The approach above will (by definition) achieve market returns, and in most cases, this is sufficient to build up a nice pot of money over a long period of time. But if it’s your hope to beat the market and build a million-dollar investment portfolio, you need to take a more hands-on approach, and to accept an increased level of risk.

The advanced approach to building long-term wealth for your child doesn’t need any extra money compared to the simple approach, however it does require a willingness to research companies and to take a more active role in managing your child’s portfolio. You’ll also experience far greater volatility and swings along the journey, so you need to be emotionally prepared, and to be confident that you can remain invested for the long-term, whatever the market throws at you in the short- to medium-run.

I’m going to start using some more complex concepts in what follows, but I’ll still try to keep this in plain English as far as I can.

Warning sign

Steps three and four (advanced option)

To be totally honest, you really shouldn’t consider trying to beat market returns until your child has around £5,000 saved. You’re no longer invested in indexes, so will need to create diversification yourself by building a portfolio of around ten to fifteen stocks. The objective of minimising dealing fees still applies, so ideally you’ll want to have at least £500 invested in each company.

You could shortcut this and just build a portfolio from scratch, investing £500 in a new company each time you have the money available – but in the early few years when your child only has a few companies in their portfolio, they’re rolling the dice a little in terms of risk. If one company bombs horribly that isn’t going to destroy your child’s financial future, but it’ll probably be hard on you emotionally, and could set the whole portfolio back by a year or two, so it’s really not ideal.

If you’re a long-time Telescope reader you’re probably already actively managing your own portfolio, so you can just apply the same insights for your child, while noting that their investment approach can legitimately follow a higher-risk higher-return strategy, as they have a whole lifetime of investing ahead of them, whereas your own retirement is at least a decade or two closer. This post provides more detail on how think about the construction of a whole portfolio.

But assuming you’re new to this site, then at a very high level the Telescope Investing approach really just boils down to a fairly simple philosophy.

  1. Use your own knowledge, experience and insight to identify strategic opportunities and mega-trends – the sectors, ideas, or impacts that will shape the needs of society in the next five, ten, or twenty years. At Telescope Investing, we’re currently tracking twelve mega-trends, and at the time of writing have shared our perspective on three of those in the following podcast episodes:
  2. Find the best quality companies within those sectors, using a mix of lenses to assess their strength. This podcast episode covers this topic and provides some examples, but to summarise we typically look for factors such as:
    • Tailwinds – does the company have market forces working in its favour, e.g. while many small businesses have struggled as a result of Covid-19, many businesses have prospered
    • Leadership – does the company have a leadership team with a proven track record, and ideally is it still led by the founders? How much of the company do insiders still own, and what do employees think of their leaders?
    • Large total addressable market – how big is the market opportunity, and how much of the market does the company have today? This tells us a lot about the growth potential
    • Low costs of production – can the company scale efficiently?
    • High barriers to entry – does the company have IP or patents that make it difficult for others to compete, or are there high capital costs for a new entrant?
    • Brand – does the company have a strong recognisable brand, are they seen as an innovator in their industry?
    • Network effects – does each additional user make the product more valuable, creating a self-reinforcing dynamic that drives growth over the long-term?
    • Customers – are customers increasing their spend over time, and is the company not over-exposed to any one particular customer?
    • Optionality – does the company have multiple ways to grow and branch out their business?
    • Financials – does the company have enough cash and free cash flow, and is their debt manageable?
    • Valuation – when we’re investing in high-quality high growth companies we should expect to pay a premium, but you’ll still want to ensure that you’re getting reasonable value for money on your investment. This takes experience and can be somewhat hard to judge, particularly for early-stage companies that may still be pre-revenue, or perhaps still unprofitable while they reinvest in their own growth
  3. Buy and hold for the long-term – we’ll expand on managing your portfolio in a future post, but right now I’ll just share the following high-level insights, gained over twenty years of investing:
    • Trying to time the market is hard (some might say impossible), it’s often better to just get stuck in
    • You want the large majority of your invested money in 10-15 stocks, or the impact of your decisions will be watered-down – you may as well just buy the index
    • You’ll get your biggest gains by letting your winners run and not trimming them too early. However, at the same time, you don’t want to let any single position grow to an uncomfortable level. This is very personal, but the generally accepted wisdom is that if it’s keeping you awake at night, you should probably reduce the exposure and find a different opportunity so you can spread the risk around
    • The environment your companies operate in is constantly changing – tailwinds may turn into headwinds, new competitors may appear, leadership may change, patents might expire, costs could increase, the brand may be damaged by a slip-up. You need to keep a regular eye on the companies in the portfolio, as there are many reasons why the investment thesis may simply no longer add up. Never take a hasty decision, but if it’s really time to pull the plug, then don’t be afraid to do so
    • As your understanding of the companies you’re invested in grows, you may find that you want to add to a position. This post provides an example of how the size of the positions within a portfolio can be managed

I mentioned at the top of this post that this is a journey I’ve taken personally, building a stock portfolio for my nephew, Tom, as part of his birthday present every year.

My wife and I have followed exactly the steps outlined above, buying $1,000 of a ‘story stock’ for Tom every year since he turned six (and when I first had the idea). I currently exclusively invest in North American equities, and Tom is following the same path in his portfolio – so I’m going to switch from sterling to dollars for the rest of this post.

In more recent years, we’ve been able to have a bit of a conversation with Tom about what to buy, and I’ve generally tried to present a couple of options so he can make the final selection himself – I’ve therefore gravitated to companies that either make sense to a ten-year-old, or that I can explain in simple terms. The side benefit of this is that I’m hoping these conversations will nurture Tom’s own interest in investing and that this is something he carries on when he takes control of the portfolio on his sixteenth birthday.

Tom’s now 11, the six companies I’ve bought him over the last few years have been:

2015 – Tesla
2016 – Disney
2017 – Shopify
2018 – Editas
2019 – Intuitive Surgical
2020 – Beyond Meat

We’ve invested $6,000, and as of today, Tom’s portfolio is worth $32,700. If we keep adding another $1,000 every year, and we sustain the same 42% compound growth rate until he’s 18 years old, the portfolio should be worth over $400,000.

Now I recognise that 2020 has been an unbelievably good year for the stocks we chose, but even if I halve that annual growth rate to a more reasonable 21%, Tom should still comfortably have $140,000 when he’s 18. At this more conservative growth rate (and of course assuming the bulk of the money doesn’t get spent on something very sensible like an education), he could reasonably expect to have a million-dollar investment portfolio by his 28th birthday (oh, and for you sterling-sticklers, that’s forecasted to grow to a million-pounds a few months before his 30th birthday).

These numbers might sound ridiculous, but this is literally the power of having time on your side. And we didn’t start until Tom was six, imagine where that number could get to if we’d begun on the happy day he was born?

The advanced approach isn’t for the faint-hearted, it requires a willingness to research companies and to actively manage the portfolio. It’s not a full-time job, but it’ll take you a focused few weeks at the outset to design the portfolio and get setup, and you’ll want to spend at least a couple of days every quarter checking-in with the portfolio and revalidating the investment case for all the companies held.

There are a huge number of great quality resources online that will help with this research, but you’ll need to use your own judgement when making investment decisions. It’s our hope that the Telescope Investing website and companion podcast proves to be one of the useful guides on the journey to financial freedom for yourselves and your children, so if you’re not a subscriber already, we’d like to invite you to join our mailing list, and perhaps to spread the word by sharing a link to this post with a friend or family member who you think might also be interested.

Thanks, and happy investing – Luke & Albert

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