Having £20k in a Stocks and Shares ISA is a decent achievement. But to build up that kind of money in an investment account takes discipline.
Of course, with a solid saving and investment strategy, it’s possible to turn £20k into a much larger sum. With that in mind, here’s how I’d aim to turn £20k in an ISA into £100k.
Capitalising on the annual ISA allowance
The first thing I’d do is put a regular savings plan in place. I’d want to use as much of my annual ISA allowance (currently £20,000) as possible because they can’t be carried forward. Once it’s gone, it’s gone.
Now, one little trick I’d use here to maximise my savings, and ensure I was contributing to my ISA regularly, is a strategy known as ’paying yourself first’.
This involves putting some savings away soon after being paid (before other expenses such as rent, bills, travel, etc).
I’ve used this saving strategy for decades now, and it’s worked wonders, allowing me to build substantial amounts of money in relatively short periods.
I’ll point out that I wouldn’t stress if I couldn’t max out the full £20,000 annual allowance. Putting away that amount every year isn’t easy and not many people are able to do this consistently.
Even if I could only achieve half the allowance (£10,000), it would add up pretty quickly. Especially if my money is invested well.
Putting my money to work
This leads me on to the next part of my strategy – investing my money to grow it faster.
The beauty of a Stocks and Shares ISA is that returns can potentially be achieved well above those offered on cash savings (because there are so many great investment options).
High returns could help me get to my £100k goal sooner.
Now, when it comes to generating strong long-term investment returns, it’s hard to beat the stock market. Over the long run, it’s provided investors with returns of around 7-10% a year.
The thing is though, to achieve these kinds of returns consistently, a solid stock portfolio is required (a handful of low-growth Footsie shares isn’t going to cut it).
Ultimately, a portfolio should be well diversified and include stocks from different industries, geographic regions, and market capitalisations (large companies, small companies, etc)
So what I’d do is set about building a rock-solid portfolio – with the help of experts like The Motley Fool – that’s designed to achieve solid, steady returns over time.
I’d include blue-chip UK stocks such as Johnnie Walker owner Diageo and London Stock Exchange Group, international stocks such as Microsoft and Mastercard, and smaller companies including Rightmove and Kainos.
I’d add in some funds for extra diversification.
This kind of portfolio should provide attractive returns over time.
£100k in five years?
How long would it take to hit my £100k target?
Well, that would depend on my level of contributions and my investment returns.
However, if I was able to contribute £10,000 a year and achieve a return of 8.5% a year on my money, I’d get from £20k to £100k in a little over five years.
