This is one way to be a millionaire... ...here are some easier ways

Chris Tarrant has caught the national imagination with Who Wants to Be a Millionaire? on ITV. But can you make a million without subjecting yourself to the terrors of the television studio? We asked investment expert Simon Martin, a research actuary with AON Consulting, to work out how you could be a millionaire by 60, with saving and investing. That's a liquid million, ignoring the value of your house, pension and so on.

Mr Martin put together some sample figures (see table). He says: "Two hundred and fifty pounds a month in your twenties looks just about do- able if you started in a good job. But it gets quite expensive if you only start investing at 50."

The secret to making your million without undue risk, says Mr Martin, is something called compound interest. With a portfolio of shares, compound interest means that if you keep re-investing all the dividends from your shares into buying new shares, your investment "pot" will grow at a rapidly increasing rate. The longer you do this, the quicker the pot grows. This is why holding shares over a long period, say 20 to 30 years, can beat any other investment.

Which brings us back to how you make your million. Mr Martin says there is no doubt investing in shares is the best method in the long term. "I would invest in them and then forget about them," he says.

He cheerfully admits this runs totally contrary to the latest craze, imported from the US of course, for "day trading" - private individuals playing the stock markets via the Internet from the comfort of their own homes. These investors tend to buy and sell shares every day, a far cry from leaving a portfolio of shares alone for half a lifetime.

Mr Martin's preferred method for building a portfolio, rather than the time-consuming and expensive path of picking stocks yourself, would be investing in an index tracking fund. This kind of fund is a recent innovation but is catching on fast. Instead of picking particular stocks to go into a portfolio, institutions invest in a range of shares in order to reflect exactly the performance of, say, the FTSE 100 index of top stocks.

Tracker funds are entirely automatic, running on computers, and as such do not require City fund managers to keep reviewing or changing the stocks, unlike "actively managed" funds - which often charge steep commissions for managing the portfolio. Mr Martin says that, apart from frequently lower charges, tracker funds also have the advantage of simplicity. You can see exactly how the fund is performing each day, simply by looking at the FTSE 100 index.

"A lot of pension funds already use tracker funds, and the Government's new, low-cost stakeholder pensions [to be introduced in 2001] will also use them," says Mr Martin. So if you're 25 and able to invest pounds 300 a month, you could plonk it all into a stakeholder pension in a couple of years, and still be just below the planned maximum annual contribution of pounds 3,600 a year - and when you retire at 60 you would end up with a million, tax free.

But we're back to boring old pensions, rather than having a liquid million stashed in the bank. And, as Mr Martin adds: "How many sad 25-year-olds are there who want to put pounds 300 a month into a pension, even if they had it? Shouldn't they be off getting drunk and driving fast cars?" Not the sentiments you might expect from an actuary, of all people.

Apart from shares, are there any other ways Mr Martin favours for making a million? How about the National Lottery? "I don't like the National Lottery, but I do like National Savings Premium Bonds," he says. Premium Bonds (minimum purchase pounds 100) award a range of prizes each month, from pounds 50 to a cool million.

This averages out as paying you an annual return of around three to four per cent a year - and you always get your capital back. And there's always the chance that Ernie, the National Savings random number generator, will pick you for the "Big One" - the monthly million-pound payout.

Mr Martin says of his own premium bonds, somewhat wistfully: "I've held them for a couple of years - I'm still hoping."

So much for the actuary's view on how to make your million. What about a fund manager, someone who is paid to make millions for people and institutions?

Chris Tracey, investment director at Fleming Asset Management, echoes Mr Martin's views - the only way to ensure you make your million by age 60 is by investing in shares. And the earlier you start the better. Mr Tracey admits that over the short term, say two to five years, you may hit a stock-market crash - like "Black Monday" on 19 October 1987.

But famously, just a year after the crash, the stock market had recovered all its losses, and then some. The longer you hold on to your shares, the surer it is that you will end up making profits, says Mr Tracey. "In the last 50 years, there has been no single 20-year period when you would have made a loss investing in shares."

Putting shares to one side for a moment, how about bonds? That is, IOUs issued by the Government (called "gilts") or by companies. Not on, says Mr Tracey, because bonds don't grow fast enough in value. "You would never make your target of a million by age 60," he says.

As always, much depends on at what age you start the whole process. For instance, says Mr Tracey, if you are young enough to be able to hold your investment for 25 years or more, there is an argument for putting the whole lot into equities. Shares will give you by far the highest return over the long term, and the longer you hold them the less you have to worry about short term falls in their value.

The older you get, he adds, the more you should look at building a mixed portfolio, combining, say, equities with slower-growing but lower-risk investments, such as bonds. The nearer you get to retirement, the more you should try to cut down on risk, by increasing the proportion you keep in cash in the bank.

The term "equities" is wide, spanning all types and sizes of companies all over the world. Emerging markets, such as Asia and Latin America, are much riskier than developed markets such as the US and Europe. So only a portion of your pot should be invested with them.

The same point goes for which sector you choose. Some sectors, such as hi-tech companies, may offer exciting growth prospects coupled with high risk. The moral is to diversify your portfolio across countries and sectors. Unless you are already a keen investor, your selection might best be left to a professional, via a collective fund, such as a unit trust or an equity ISA.

Are there any other ways of making a million through investment? How about that favourite after-dinner topic, bricks and mortar? Its impossible to open the papers these days without reading about the current boom in house prices.

Forget it, says Mr Tracey. "Residential property has been a good hedge against inflation over the last 30 years - but you would probably still have done better with equities. We believe the high inflation of the 1970s and early 1980s was an anomaly."

With factors such as Internet commerce and globalisation driving down inflation, you should be looking at investments which will grow in value despite low inflation, he says.

What about gold? Again, a great hedge against inflation, but not so useful while price rises are low. You get no income so, overall, you get "a pretty awful return" Mr Tracey says.

How about great works of art? Railplan, the old British Rail pension fund, had a go at investing in paintings in the 1970s, and didn't do too badly. But you will be hit by the costs of insurance, storage, and no income.

The sting in the tale is, a million won't be worth what it is today when you do hit 60, even in an era of low inflation. Say you are aged 25 today and on a salary of pounds 25,000 pa. If you invest pounds 300 per month at nine per cent you will get your million at age 60. What kind of pension annuity would that buy you in today's terms?

The answer is, it would get you an income worth just pounds 10,000 a year in today's money. Not exactly a jackpot to look forward to. Perhaps you should raise your game, play safe and make the target pounds 10 million...