£1,500 to invest? Here’s how I’d turn it into £10k buying cheap shares!
Enter Your Email Address Image source: Getty Images Cliff D’Arcy | Friday, 5th March, 2021 FREE REPORT: Why this £5 stock could be set to surge To begin, I confess that I am terrible with paperwork. In fact, I practically have a phobia of admin. Thus, my highly organised wife takes care of that side of things. Bearing that in mind, I got a surprise missive through the post last week. An envelope arrived containing details of a small personal pension that I took out in the early 1990s — 30 years ago. This was the first yearly statement I’d had from this pension provider for many years. I guess they must have finally tracked me down.But I was so disappointed with what I saw in this statement, that I’m going to fire this pension firm. And I’m going to move my money into a pension that allows me to invest in cheap UK shares.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Turning £250 into £1,500 over 30 yearsThough I had long forgotten about this pension, I do recall how much I initially invested. It was a one-off lump sum of around £250 in 1991, early in my career. How much do you think that would be worth today? The answer is a smidgen over £1,500. In other words, it’s now worth six times what I put in. While that may sound like a decent return, don’t forget that it works out at a 500% return over 30 years. That equates to a compounded return of 6.15% a year for three decades. Alas, this money wasn’t invested in cheap shares. Instead, it was invested in two actively managed funds. Sadly, the fees charged by these funds gobbled up much of my gains.Back in 1991, I split this pension contribution into two halves. Half went into an international ‘balanced managed’ fund. This has performed very poorly in terms of returns. Over 30 years, it has turned £125 (half my initial contribution) into £500. That’s a compound return of a mere 4.73% a year. This is a truly awful performance and places this fund among the UK’s worst, I’d wager. I suspect I could have made a multiple of this sum investing this into cheap shares.The remaining £125 went into a UK-focused ‘balanced managed’ fund. This easily outperformed the international fund, turning £125 into £1,000 over three decades (twice as much). That equates to a compound return of 7.18% a year. That’s better than the international fund, but I may have done better by picking my own cheap shares.Turning £1,500 into £10k by buying cheap sharesAlas, it turned out that these two ‘balanced managed’ funds were actually unbalanced and mismanaged. That’s why I’ve decided to cut ties with this poor pension provider to control this money myself. I’m going to leave these failing funds by transferring my money into my SIPP (Self-Invested Personal Pension). Once this transfer is complete, I will invest it all in one of the world’s most attractive markets for cheap shares: the UK’s FTSE 100.Mortality statistics suggest that I might not live another 30 years. Hence, my goal will be turning my £1,500 into £10k over the next 20 years. To do this takes a compound yearly return just short of 10% (9.95% a year, to be exact). I’m optimistic that, by buying into quality companies with growing revenues, profits, and dividends, I can achieve this 10%-a-year return. I’ll start by buying a few cheap shares that pay the UK’s highest dividends. Then I’ll keep reinvesting this passive income into yet more shares and we’ll see how things go from there! See all posts by Cliff D’Arcy Our 6 ‘Best Buys Now’ Shares Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors. I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. 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