If I’d put £20k into a Stocks and Shares ISA 10 years ago, here’s what I could have had now

Invested the right way, a Stocks and Shares ISA could have delivered enormous returns over the last decade, says Edward Sheldon.

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.

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Investing within a Stocks and Shares ISA, for the long term, is one of the best ways to build wealth in the UK. With these accounts, one can access a vast selection of growth investments and all gains are tax-free.

How much money could I have made if I’d put £20k (this would have been more than one year’s annual allowance at the time) into one of these ISAs a decade ago? A lot, quite frankly.

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.

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A tax-free wrapper

The returns an investor will generate within a Stocks and Shares ISA will depend on the investments they choose.

That’s because these ISAs are merely tax-efficient ‘wrapper’ accounts. They are not investments themselves.

But let’s look at a few examples of what I could have achieved over the last decade with an ISA.

A global tracker fund

Let’s say I put the whole £20,000 into a simple global tracker fund such as the iShares Core MSCI UCITS ETF.

Created with Highcharts 11.4.3iShares III Public - iShares Core Msci World Ucits ETF PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

In this scenario, I’d now have around £58,000 after fees.

Not a bad result at all, given the hands-off, passive nature of tracker funds.

An actively-managed fund

Now, let’s say I’d put the whole £20k into Fundsmith Equity – the UK’s most popular actively-managed equity fund.

According to one data provider, it has returned about 14.6% per year over the last decade.

Crunching the numbers, I calculate that I’d have roughly £70,000 today once fees are factored in.

Tech stocks

What about if I’d taken the stock picking into my own hands and invested in a selection of tech stocks?

Let’s say I had put £5k into Apple, Alphabet, Microsoft, and Amazon shares a decade ago.

In this scenario, I’d have done really well.

Created with Highcharts 11.4.3Apple PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

The average return over the last decade from these stocks is about 23.5% per year.

So, factoring in GBP/USD exchange rates, I’d now have a little over £200k from my £20k investment – an amazing result.

It’s worth pointing out, however, that it would have taken some foresight to pick those four stocks a decade ago.

At the time, these companies were far less dominant than they are today.

It’s also worth noting that all four stocks have been volatile over the last decade. I would have had to put up with a lot of portfolio turbulence.

Tesla shares

Finally, what about if I’d gone ‘all in’ on Tesla stock?

Created with Highcharts 11.4.3Tesla PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

Well, it has returned about 39% per year over the last decade.

Crunching the numbers, I calculate that I’d now have around £680,000 in my ISA once exchange rates and fees are factored in.

That’s obviously a life-changing amount of money.

However, I will point out that putting £20k into Tesla 10 years ago would have been a very risky approach as the company was in its infancy and only had a few cars on the road.

And there would have been some wild portfolio value swings along the way.

Powerful investment vehicles

Of course, I have cherry picked a few examples here.

Not all investments have performed this well over the last decade.

The takeaways are clear though.

Stocks and Shares ISAs are powerful investment vehicles.

And picking individual stocks can potentially deliver huge returns.

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Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon has positions in Alphabet, Amazon, Apple, Microsoft, and Fundsmith Equity. The Motley Fool UK has recommended Alphabet, Amazon, Apple, Microsoft, and Tesla. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, 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.

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