Many investors dream of being able to make a million by investing in a Stocks and Shares ISA. The good news is that it’s relatively easy to hit this lofty target. All you need to do is set up a regular investment plan, reinvest your dividends and let the market do the rest.
Today I’m going to outline the approach I plan to use to hit this target.
Stocks and Shares ISA investing
Investing in a Stocks and Shares ISA is one of the best ways to grow your wealth over the long run.
These products are very similar to traditional dealing accounts. The difference is you can only put £20,000 a year into an ISA, but any income or capital gains earned on this money is tax-free.
Some investors have been able to make a million using these products exclusively. It’s estimated that around 1,000 Britons have made a million or more by buying UK shares through one of these tax-efficient investment products.
Some of the most popular products with Stocks and Shares ISA millionaires are investment trusts. High-quality blue-chip stocks such as GlaxoSmithKline also feature. I’m using a combination of both of these in my quest to make a million.
Make a million with trusts
Investment trusts allow investors to buy a basket of stocks at the click of a button.
Some of these trusts target specific sectors or industries, while others may target different assets.
One of the most popular investment trusts on the market at the moment is the Scottish Mortgage Investment trust. This firm owns a basket of high growth tech stocks from around the world. It gives investors a way to bet on the tech sector without having to worry about picking individual stocks.
I think Scottish Mortgage is an excellent way to invest in the market’s fastest-growing businesses.
However, I would also hold a basket of high-quality dividend-paying blue-chip stocks in a Stocks and Shares ISA.
Growth stocks can be highly volatile, while defensive income stocks are much more predictable. A combination of both in a portfolio will provide investors with a great blend of income and growth.
GlaxoSmithKline is the perfect example of a defensive dividend stock. Other potential investments include British American Tobacco or oil major BP. Although the latter recently cut its dividend, I’m highly excited about its long-term potential as the company transitions away from hydrocarbons towards renewable energy.
The bottom line
By using a combination of investment trusts and blue-chip stocks, I think it’s possible to make a million in a Stocks and Shares ISA.
This approach won’t make anyone a millionaire overnight, but it will lead to steady wealth creation over the long run.
By concentrating on the market’s long term potential and reinvesting any dividends received, investors can swing the odds of hitting this target in their favour.
The post How I’m planning to make a million with a Stocks and Shares ISA appeared first on The Motley Fool UK.
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Rupert Hargreaves owns shares in British American Tobacco. The Motley Fool UK has recommended GlaxoSmithKline. 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.
Motley Fool UK 2020