£20k in a Stocks and Shares ISA? Here’s how I’d aim to turn it into £200k

There’s no better way I know to try to get rich than to put as much as I can in a Stocks and Shares ISA each year, and leave it there.

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Could I really turn one year’s Stocks and Shares ISA allowance into a 10-bagger and net myself a cool £200k?

Well, the magic of compound returns suggests it really is possible.

Maybe I could find the next growth stock that’s going to skyrocket. Then just stick my £20k in it, and wait until it’s worth 10 times the price. But does anyone know how to find this magic stock?

Jam tomorrow?

I don’t. I’d say far more of the ‘jam tomorrow’ stocks I’ve seen over the years have crashed and burned than soared.

But then, all we need to do is get our timing right, surely? Buy stocks when they’re down and sell them when they’re up. Do that lots of times, and the £200k will soon be in my grasp, right?

Timing is for losers

Again, that’s super hard to do. Most folks who try to time their buys and sells, and dip in and out on the chart ups and downs, don’t do so well.

They end up losing as often as winning, and they rack up trading charges that chip away at their cash.

So no, I’m turning to one of the best bits of investment wisdom that I’ve ever heard instead — that time in the market beats timing the market.

Buffett’s 20%

That’s key to Warren Buffett’s success. The billionaire investor has managed an average return of 20% per year since he took charge of investing firm Berkshire Hathaway in 1965.

If I could achieve that, I could turn £20k into £200k in just 13 years. But that’s way too optimistic. I’m just not that good.

Over the past decade, we’ve seen average Stocks and Shares ISA returns of 9.6%. That could turn a one-off £20k into £200k in 26 years.

Or, going on the past 20-year average annual FTSE 100 return of 6.9%, it should take 35 years.

What to do

But, if I don’t have £20k to plonk down, what can I really do to maximise my chance of retiring rich?

Like most people, I don’t have the cash to get near my full ISA allowance every year. But I don’t think I need to, and we can do well with a lot less.

The trick is to put as much as I can in my Stocks and Shares ISA every year, whatever that is.

£5k per year

If I can manage £5,000 per year? That’s a lot more realistic. And let’s be conservative and just go on that 20-year average Footsie return of 6.9%.

That could get me to £20k in a bit over 3.5 years. Hey, I’d be ready to start!

Another 16.5 years at £5k per year should get me past the magic £200k mark. I’d have stumped up a total of £100k, spread over 20 years, and seen it more than double.

Even better?

And, you know, with careful selection of top dividend stocks, I think I have a fair chance of beating the FTSE 100 average and doing even better. I might do worse, mind. But I’m an optimist.

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.

Alan Oscroft 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.

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