A rare chance to build a £100k Stock & Shares ISA as the market dips! Here’s what the charts say

The FTSE 100 is a prime hunting ground for value investors. Dr James Fox explains why this could be a great time to start a Stocks & Shares ISA.

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.

Young Asian woman holding a cup of takeaway coffee and folders containing paperwork, on her way into the office

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Many young investors dream of having £100k in a Stocks and Shares ISA. This figure could be the platform for even more wealth building, or it could be used to generate passive income.

In the current market, such a figure could easily generate £500 a month in tax-free passive income.

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.

Efficient earnings

Undoubtedly, the Stocks and Shares ISA is the most efficient method for generating investment-derived income and wealth. This notable advantage stems from one enticing attribute, wherein any income or capital gains generated within the ISA remain entirely exempt from taxation.

I have the option to open an ISA account through most prominent UK brokerage platforms. The account then enables me to contribute up to £20,000 annually. In theory, with ample resources at hand, I could potentially amass £100k in just five years.

However, most of us are not that fortunate. Realistically, the path involves gradually saving, allowing us to incrementally nurture our portfolios and work towards our financial aspirations.

This measured approach aligns with the practicalities of most individuals, enabling investors to progressively build a robust investment foundation.

Opportunity beacons

A number of the most renowned investors in contemporary history, such as Warren Buffett and John W Rogers Jr, have significantly bolstered their fortunes through strategic investments during market downturns.

A noteworthy example is Buffett, who is often quoted on his sage advice: “Bad news is an investor’s best friend.” This perspective underscores the wisdom of capitalising on market contractions, a strategy that has been pivotal in shaping the success stories of these notable financial figures.

During a recent conversation with David Rubenstein, Rogers recounted his actions during the financial crises of the early 1990s and late 2000s. He shared that he proactively reached out to investors, requesting additional funds. He contended the downturns in the marker presented a rare opportunity to acquire quality stocks.

What about now?

While we haven’t witnessed a crash, it’s evident that the FTSE 100 has experienced a 3% decline over the course of five years, while the FTSE 250 has faced a more substantial 10% drop.

UK-listed stocks haven’t achieved the growth potential that could have materialised post-Brexit. Interestingly, this trend isn’t predominantly attributable to earnings performance, but rather to the prevailing negative investor sentiment.

In stark contrast, the S&P 500 has surged by an impressive 53% over the same five-year period. Personally, I hold the belief that there’s a significant amount of concealed value within the FTSE 100. The pivotal question revolves around the catalyst that will propel its upward trajectory.

Creating at TradingView

This is precisely where the opportunity resides, waiting to be harnessed. Sometimes it takes a while for stocks to actualise their intrinsic value. But by investing in UK stocks today, towards the bottom of their cycle, I could propel my investments moving forward.

Just think about this. If, and it’s a big if, the FTSE 100 were to grow in the next five years as fast as the S&P 500 did in the previous five years, I could turn £10,000 starting capital, and £1,000 a month, into £100k in half a decade.

Of course, that still involves some hefty contributions. But, even with smaller sums of money, investors stand to gain if they pick wisely in fallen markets. However, it’s important to acknowledge that poor investment decisions have the potential to result in financial losses.

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.

James Fox has no position in any of the shares mentioned. 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.

More on Investing Articles

Black father and two young daughters dancing at home
Investing Articles

£2,500 in savings? Here’s how I’d aim to turn that into an £27,113 second income

Many of us have savings, or put an amount aside every month. But it's what we do with it that…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Are Anglo American shares like buying £1 coins for 50p?

Jon Smith takes a look at the falling price of Anglo American shares and asks whether they're chronically undervalued or…

Read more »

Close-up of British bank notes
Investing Articles

I’d buy 1,064 shares of this dividend growth stock for £1,000 a year in passive income

Shares in FTSE 100 conglomerate Bunzl come with a 2% yield at today’s prices. But Stephen Wright thinks this is…

Read more »

Growth Shares

Under 50? Here are 3 monster growth stocks to consider for 2024 and beyond

These US-listed growth stocks could deliver blockbuster gains for long-term investors in the years ahead, says Edward Sheldon.

Read more »

Investing Articles

Here’s how much I’d need to invest in Tesco shares for £100 in monthly passive income

Our writer does not own shares of this supermarket for passive income, but how many would he need to buy…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could £200 of Christmas money be used to start buying shares this month?

Our writer reckons if he was a stock market novice, he could put some Christmas money to work and start…

Read more »

Close-up of British bank notes
Investing Articles

Here’s how I’d aim to build a £250 monthly second income in 2024 – and far beyond!

Our writer thinks buying carefully-chosen dividend shares could help him build a second income over the long term. Here's his…

Read more »

Investing Articles

If I’d put £10k into a FTSE 250 tracker 10 years ago, here’s what I’d have now

UK investors love FTSE 250 tracker funds. But have these products been a good investment over the long term? Edward…

Read more »