Here's how I'd invest £100 per week in an ISA to get rich and retire early

Here’s how I’d invest £100 per week in an ISA to get rich and retire early

Investing regularly in an ISA could lead to high returns over the long run, in my view. Here’s how I’d invest given current stock market conditions.

Peter Stephens ❯

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 24 November, 2020 2:32 pm GMT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Investing £100 per week in a Stocks and Shares ISA may not seem to be a sufficient amount to make a real impact on an investor’s retirement plans.

However, the past performance of UK shares means regular investments can add up to a sizeable portfolio value over the long run.

As such, with many FTSE 100 and FTSE 250 shares trading at low levels after the stock market crash, now could be an opportune moment to invest in high-quality companies at cheap prices for the long run.

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Investing in attractive businesses at low prices in an ISA

While many UK shares have rebounded following the stock market crash, others offer capital growth opportunities for ISA investors. Some sectors remain unpopular among investors due in part to their weak near-term outlooks. Although this may mean their financial prospects are disappointing in the short run, over the long run they could deliver impressive capital returns.

As such, identifying cheap stocks that warrant a higher valuation could be a logical approach to investing regularly in UK shares at the present time. Some FTSE 100 and FTSE 250 companies deserve to trade at higher share prices. These may include those businesses with low debt levels and a large proportion of variable costs. They could weather further economic challenges better than their peers. Similarly, companies with wide economic moats, perhaps in the form of unique products or brand loyalty, may provide greater scope for capital gains in an ISA.

Building a retirement portfolio with UK shares

Clearly, UK shares face short-term risks in many cases. Therefore, having a diverse ISA that contains many companies in multiple sectors could help to reduce risks. It may also allow an investor to benefit from growth opportunities in a wider range of industries. The future is highly uncertain at the present time. So it may be useful to have exposure to more than just a small number of industries in the coming years.

Even if an investor is only able to match the returns of the stock market, they could retire on a surprisingly large ISA portfolio by investing modest amounts regularly. For example, the FTSE 100 has delivered an 8% per annum total return since it was formed in 1984. Assuming the same rate of return on a £100 weekly investment over a working lifetime of 40 years could produce a portfolio valued at over £1.5m.

Clearly, not all investors will have 40 years left until retirement for their ISA to grow. Look to buying a diverse range of today’s high-quality companies at low prices. By doing so, it’s possible to generate market-beating returns over the long run. And that means an investor may be able to generate a higher rate of growth than the FTSE 100 to improve their financial outlook.