Investors have a lot of options these days. Thanks to advances in technology, it’s now possible to put money into a wide range of products. So, are Stocks and Shares ISAs a good investment? Let’s discuss.
Tax-efficient investment vehicles
The thing to understand about Stocks and Shares ISAs is that they’re not actually investments.
Instead, they’re investment accounts or ‘vehicles’.
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Within these accounts, one can invest in a wide range of different assets and products including investment funds, investment trusts, index funds, exchange-traded funds (ETFs), UK shares, international shares, and more.
And all gains and income generated inside them are completely tax-free (which is a huge advantage when building wealth for the long term).
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.
Access to top products
There are certainly some fantastic investments available within these ISAs, however.
Take the Vanguard FTSE Global All Cap Index, for example. This fund, which is available through ISA providers such as Hargreaves Lansdown, AJ Bell, and Interactive Investor, provides exposure to over 7,000 stocks globally (including the likes of Apple, Amazon, and Tesla) for a very low fee of around 0.2% per year (plus platform fees).
Over the last five years, it has returned around 47%, which is a decent figure. Past performance isn’t an indicator of future performance though.
Another fund that’s worth highlighting is Fundsmith Equity. This is an actively-managed global equity product that invests in high-quality businesses. Run by portfolio manager Terry Smith, it has an amazing track record, having returned about 15% per year since its launch in late 2010. There’s no guarantee it will deliver strong returns going forward, of course.
Stocks can be great investments
Individual stocks – which are available to buy via most Stocks and Shares ISAs – can also be great investments.
Take Apple, for example (which is listed in the US). Over the last five years, it has risen about 220%, meaning that if I had invested $5,000 in the company five years ago, my pot would now be worth around $16,000.
Another example of a stock that has done really well for investors over the long term is London Stock Exchange Group (which is listed here in the UK). Over the last five years, shares in the financial markets infrastructure company have risen about 75%. Investors have also received dividends.
Generating strong long-term returns
In conclusion, it’s definitely possible to generate strong returns within a Stocks and Shares ISA.
One’s returns will depend on the mix of investments, however.
Ultimately, the key to success with these ISAs is building a diversified investment portfolio that includes a mix of stocks from different industries (technology, healthcare, consumer goods, financial services) and geographic regions (UK, US, Europe, and so on).
By taking a diversified approach like this, one can limit the risk of investing in a dud asset, and give oneself a great chance of achieving strong long-term returns.
