I could drop £497 a month into a Dividends and Shares ISA to aim for a million

Investing within a stocks and shares ISA can be a great way to build wealth.

According to HM Revenue and Customs (HMRC), the number of ISA millionaires in the UK has risen to more than 4,000.

The rules say we can invest up to £20,000 in an ISA each year. Then that money can grow through investment without attracting tax.

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.

However, not many people have that much free money each year to invest in stocks. So I would plan to invest just £497 a month, adding up to £5,964 a year.

Small beginnings can lead to big things

But that small amount can still have the potential to make a big impact over time and can lead to a portfolio worth a million.

US billionaire investor Warren Buffett is looking to America S&P 500 The index has delivered compound annual gains of just over 10% since the 1960s. If I can multiply that rate of return, it would take about 29 years to build up an investment of £497 a month in a pot worth a million.

Buffett's record over the same period is nearly double the average annual return of 10%. But, of course, there are no guarantees that I can match Buffett's performance or that of the S&P 500.

However, those ISA millionaires have clearly done well. But most played the long game because the consolidation process can lead to big gains in the long run.

Another important factor is careful business selection. That means doing a lot of initial research before buying any stock.

Like most investors, I keep my best ideas on the watch list and aim to buy stocks at the right times. For example, right now I like the look of Bakkavor (LSE: BAKK).

Trade well and get better

The company is a UK-based supplier of fresh food prepared in the UK, US and China, offering it to supermarkets and other retailers.

Trading has been going well and the progress is visible on the share price chart.

September's half-yearly report shows more progress in numbers. The vision statement says the directors are there “I hope” the company will deliver profits ahead of expectations in 2024.

Meanwhile, City analysts have penciled in a 22% jump in average wages this year and just over 10% by 2025.

I love the food industry for its protective features. Firms like Bakkavor are less affected by economic ups and downs than others. However, the stock comes with its own risks.

The economic shock of the past few years has caused business difficulties and that reflects a poor record for many years of earnings. Part of the problem is that the operating margin is quite low, running at around 4.9%. Potential challenges may continue in the coming years.

Still, CEO Mike Edwards said the restructuring effort supports the company's operations through 2024. Directors are focused on reshaping boundaries and they are “happy” about developing a strong business as general economic conditions improve.

On balance, despite the risks, I would research and consider Bakkavor for inclusion in a diversified long-term portfolio now. After all, with a share price in the ballpark of 152p, the forward dividend yield to 2025 is 5.4%.