3 ETFs for my Stocks and Shares Lifetime ISA

A Stocks and Shares Lifetime ISA offers a great option for saving for the future, but I still need to decide what stocks to buy.

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I think a Stocks and Shares Lifetime ISA (individual savings account) is a great way to invest for the long term. It allows people under 50 (however, you cannot open one if you’re older than 40) to save up to £4,000 annually for either a house or retirement and use this money to invest in the stock market without paying tax. The real benefit of a Lifetime ISA is that the government will add 25% to anything you put in it (up to a maximum of £1,000 per year). Here are some of the ETFs (exchange traded funds) that I want to keep in mine until I retire.

Vanguard S&P 500 UCITS ETF (GBP) (LSE:VUSA)

The first ETF I would like to hold in my Stocks and Shares Lifetime ISA is one that tracks the S&P 500. This is a collection of 500 US shares known as an index. The index is designed to track the performance of all major industries in the US economy. The creator of this ETF, Vanguard, aims to pool all the investors’ money together and use it to buy these 500 shares. The performance of this ETF will rely on the combined return of all 500.

Due to the strength of the US economy, the relative stability and the strong legal system that allows companies to protect their property, it has had a good return historically. Between 1957 and 2018 its annual return averaged 8%, and I think something similar should be able to continue. This is also helped by the US’s dominance in tech. This ETF seems like a good choice for steady growth of my Lifetime ISA.

Vanguard FTSE All-World UCITS ETF (LSE:VWRL)

This ETF is another index tracker fund like the last. The difference here is that instead of aiming to track the performance of the US economy, this ETF follows the FTSE All-World index, which aims to track the performance of the entire world economy. However, there is more exposure to the US (55.8%) than other countries. Thus, bad performance of the US economy would affect this ETF significantly. That said, this index still offers me the opportunity to benefit from the overall growth of the world economy. I would view this ETF as safer than the S&P 500 ETF because it does not rely on only one country’s economy, which can be affected by political decisions or national disasters. It also offers 11.6% exposure to emerging markets, which can potentially allow for greater growth, although they can be riskier than developed markets.

iShares Core FTSE 100 UCITS ETF (LSE:ISF)

The last ETF that I’d like to mention is an FTSE 100 index tracker. This tracks the performance of 100 companies listed on the London Stock Exchange with the highest market capitalisation. I picked this because I think that in the next few years it will experience good returns. Brexit uncertainty is shrinking, and the London Stock Exchange has some exciting new listings such as Trustpilot on 23rd of March, and Deliveroo is preparing to go public in a highly anticipated IPO. I hope that new interest in London shares may help to give the FTSE 100 a boost. However, the next years could be bad for the UK economy; if so, this ETF probably wouldn’t perform very well.

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 considered so you should consider taking independent financial advice.

Oliver Mardlin has positions in Vanguard S&P 500 UCITS ETF (GBP) and Vanguard FTSE All-World UCITS ETF. The Motley Fool UK has no position in any of the shares mentioned. 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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