How I would use £35,000 to make a million if the next stock market crashed

A stock market crash may seem like a disturbing event. But it can also offer the savvy long-term investor a great opportunity to buy world-class companies at a low price.

By doing this, I think the next time the market crashes I could realistically aim to use £35,000 to build a portfolio that will eventually be worth £1 million. But waiting for disaster may be too late – I need to prepare now.

Getting money for investments

£35,000 is a significant amount of money and I would take the time to save it. This is also more than A one-year allowance for my Stocks and Shares ISA.

So I would assume the so-called Stocks and shares ISA now and start depositing money to prepare £35,000 to invest in a tax-efficient way.

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

How would I aim for a million

So how could I aim to turn £35,000 into a £1m portfolio?

The key in this case would be to take long-term approach to investing.

Imagine I invested £35,000 and this amount grew at a compound annual interest rate of 15%. After 24 years I would be a millionaire.

The challenge is that a 15% compound annual growth rate over the long term is much harder to achieve than you might think.

I use the breakdown to my advantage

This is where the idea of ​​a stock market crash might come in handy. It can create opportunities to increase my long-term profits.

Take an asset manager M&G (LSE: MNG) as an example.

If I were to buy the so-called FTSE100 shares, I would receive a potential dividend rate of 9.8%. This is already promising and places this share among the highest yields on offer in the FTSE 100.

But let’s go back to a few points during the stock market crash in the spring of 2020, when M&G was selling for about 54% of its current price.

This means that if I had invested in stocks at that point, my investment would be now giving over 18% per year.

Making the right move at the right time

I happen to own M&G shares. I like the asset manager’s focus on a large, vibrant industry, its established reputation and client base. The dividend is attractive, with the last increase announced just last month.

On the other hand, a company must work hard to prosper. There was a net outflow of customer funds (excluding the company’s heritage business) in the first half, which could have hurt both revenues and profits.

Still, I plan to keep my shares in M&G. But if I had bought them during the 2020 crash, I would be making much more money on them now.

These opportunities may be short-lived, so it’s important to be well prepared. I keep a purchase list of stocks I want to buy if I can get them at the right price.

I don’t know when the next one will be stock market crash will come. I think by preparing in advance I increase my chances of turning £35,000 into a £1 million portfolio!