𝓤𝓷𝓲𝓽𝓮𝓭 𝓝𝓮𝔀𝓼

Building a meaningful investment portfolio can feel daunting if you’re starting from zero.

But reaching a £25,000 pot is more achievable than many people think – especially when it’s tax-free.

The secret is less about picking the next winning stock and more about consistency…and time. Investing regularly, month after month, and allowing your money to compound over time can do much of the heavy lifting.

Assuming an average annual return of 7 per cent – broadly in line with long-term global stock markets returns, though never guaranteed – here’s how long it could take to build a £25,000 portfolio.

How long does it take to reach £25,000?

Assuming a 7 per cent annual investment return, and using a stocks and shares ISA for tax-free growth, here are some example scenarios of how long it takes to reach £10,000 and £25,000 in total.

With a monthly investment of just £100, it should take fewer than seven years to hit four figures, and 13 years to reach £25,000. At that point you would have contributed £15,600 yourself – and have over £9,000 in earned growth, compounding over time. Keep putting away just £100 a month for three decades and you’d save £36,000 yourself – but your pile would be £117,000!

That’s the power of compounding, and the importance of time.

If you are able to put away a higher total, say £300 each month, it shortens the timelines considerably – to fewer than three years for a four-figure pile and to just six years for £25,000. After 30 years? That’s a £350,000 kitty ready to contribute to your retirement or a major life cushion.

Some people start investing when they get a lump sum available to them, perhaps from inheritance or an asset sale. Starting with £2,000 and then adding £200 a month will see you hit four figures after three years, £25,000 shortly after seven years and six figures before 20 years.

These figures are just illustrative and assume investments grow steadily at 7 per cent a year. In reality, markets rise and fall and grow at different rates each year, and investment fees will also affect returns, though you can reduce those costs by using platforms which charge low or no fees.

Why compounding matters

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One of the biggest advantages investors have is the factor we spoke of earlier, compound growth: earning returns not only on the money you invest, but also on the gains you’ve already made.

In the early years, your portfolio grows mainly because of your monthly contributions.

As the pot gets larger, however, investment returns begin to play a much bigger role. Eventually, your money starts generating more money than you are contributing yourself.

In our £300-a-month scenario, by year 11 your annual growth gain (£3,708) is more than your annual contributions made (£3,600 a year) – and that gap only continues to widen.

That is why financial planners often stress that starting early can be more valuable than investing larger amounts later in life.

Make investing a habit

Ian Futcher, financial planner at Quilter, says the most important step is simply getting started.

“Once you’ve built up an emergency fund to cover unexpected expenses, investing can be a sensible next step for any money you’re putting aside for the longer term. Many platforms allow you to start with small amounts, meaning you can get started with a relatively low commitment and build from there.

“Building the habit of investing regularly is one of the most important factors. Setting aside an amount you can comfortably afford each month and treating it like any other household bill can keep you on track. It can also be helpful to automate contributions or arrange for money to be invested shortly after payday, before it gets absorbed into your other spending.”

Experts caution those starting out investing that there will always be times that markets are more volatile – but that’s a normal part of the investing journey and, if you stay the course, can be the most beneficial times in the long run.

“By continuing to contribute through market ups and downs, investors can benefit from pound-cost averaging and stay focused on their long-term goals rather than short-term market movements. That is why getting started as early as possible and sticking with your plan is so important,” he added.

Which investments have performed best?

No investment is guaranteed to produce a 7 per cent annual return every year, but history offers a useful guide.

Over the long term, global equities have been among the strongest-performing asset classes:

That’s why it’s important to note past performance is not a guide to future returns. Many experts therefore recommend using a diversified global fund rather than trying to predict which region, sector or single stock will perform best next. More adventurous investors may choose to allocate a small portion of their portfolio to individual shares in the hope of generating higher returns, though this comes with added risk.

Building a four-figure, £25,000 investment portfolio or even a much bigger six-figure retirement pot doesn’t require a huge salary, investing expertise or perfect timing.

What matters most is investing consistently, staying invested through market ups and downs, and giving compound growth time to work.

For many people, treating monthly investments like any other household bill – paid automatically after payday – can make the difference between intending to invest and actually building long-term wealth.

When investing, your capital is at risk and you may get back less than invested. Past performance doesn’t guarantee future results.