The Stocks and Shares ISA is a powerful investment vehicle. Not only does it offer access to a range of assets that can grow wealth quickly (like stocks and funds), but all gains and income generated within it are completely tax-free.
Want to see an example of how powerful this kind of investment account is? Here’s a look at how much money I could potentially build if I contributed £300 a month into one of these products for 10 years.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Aiming for 8% a year
There’s no standard annual return with Stocks and Shares ISAs. Ultimately, these will depend on what you decide to invest in, and there are many different options.
With a decent investment strategy however, I think it’s reasonable to expect an 8% return a year over the long run. It’s generally said that stocks return between 7-10% a year over the long term, so I think 8%’s very realistic.
The key to achieving this kind of return is building a well-diversified investment portfolio. If an investor only owns a handful of stocks, the risk is generating lower returns as performance could be dragged down by weakness in the portfolio.
Similarly, investing only in one geographic market such as the UK runs the risk of underperformance. Recently, I calculated that over the last 20 full calendar years, the UK’s FTSE 100 index had only returned about 6.3% a year.
A sound investment strategy
Building a diversified portfolio isn’t hard however. One easy way is to invest in a global index fund such as the Vanguard FTSE All-World UCITS ETF (LSE: VWRP). This investment fund allows exposure to over 3,500 stocks including big names like Apple, Amazon, and Nvidia. They also get access to different geographic markets such as the US, Europe, the UK, and Asia.
In terms of performance, this particular fund’s done well in recent years. Over the five-year period to the end of October, it returned 69% (before platform fees and trading commissions), which equates to about 11% a year on an annualised basis.
Of course, past performance isn’t an indicator of future returns. If there was a global stock market pullback, this product would deliver poor returns in the short term (and perhaps further down the line).
Overall though, there’s a lot to like. With its ongoing fee of just 0.22% a year, I think this fund could be an excellent foundation for an investment portfolio.
Add in a few individual stocks or niche investment funds to target specific areas of the market (eg artificial intelligence (AI) or healthcare) could help build a very decent portfolio.
Turning £300 a month into thousands
Going back to the 8% return a year though, let’s say I put £300 a month into a Stocks and Shares ISA for 10 years and I was able to generate that return on average. In this scenario, I’d have about £52,000 at the end of the decade.
That’s a substantial amount of money. And I wouldn’t have to pay any tax on it. What a great result.
The post If I invested £300 a month in a Stocks and Shares ISA, here’s what I could have in 10 years appeared first on The Motley Fool UK.
But this isn’t the only opportunity that’s caught my attention this week. Here are:
5 Shares for the Future of Energy
Investors who don’t own energy shares need to see this now.
Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.
While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.
Open this new report — 5 Shares for the Future of Energy — and discover:
Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
How to potentially get paid by the weather
Electric Vehicles’ secret backdoor opportunity
One dead simple stock for the new nuclear boom
Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!
Grab your FREE Energy recommendation now
More reading
Is a global index fund all I need for my ISA and SIPP?
Edward Sheldon has positions in Amazon, Apple, and Nvidia. The Motley Fool UK has recommended Amazon, Apple, and Nvidia. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.
