I reckon a Stocks and Shares ISA is one of the best investment vehicles available to British investors.
Every investor in the UK is entitled to a £20,000 allowance each year. If I decided to withdraw my money, I wouldn’t pay a penny in tax.
Let’s say I had a blank canvas with my Stocks and Shares ISA. Three stocks I’d love to buy are B&M (LSE: BME), National Grid (LSE: NG.), and Lloyds Banking Group (LSE: LLOY).
Here’s why!
What they do
B&M is a burgeoning discount retailer that has grown massively in recent years. National Grid is the owner and operator of the gas and electricity transmission system in the UK. Lloyds is one of the largest banks in the UK, and is the biggest mortgage provider in the land.
So how have the three stocks performed over the past 12 months?
B&M shares are up 13% in this period from 424p, to current levels of 528p. National Grid shares are down just 3% from 1,071p to current levels of 1,031p. Last but not least, Lloyds shares are down 13% from 51p to current levels of 44p.
The investment case
B&M has made the most of consumers looking to make their budgets go further in recent years and the rise in popularity of discount retailers. Organic and acquisition-led growth has pushed the shares up to the FTSE 100 index.
At present, B&M shares offer a dividend yield of 6.5% and the shares trade on a price-to-earnings ratio of 15, which is attractive.
Conversely, if turbulence cools and people have more money to spend, could they turn away from discount retailers? Plus, as B&M looks to expand into Europe, risks of failed acquisitions or poor performance could hurt investor sentiment and returns.
National Grid’s monopoly and defensive ability are its two primary allures for me. After all, everyone needs energy. The shares offer a yield of over 5% and they trade on a P/E ratio of just five.
The risk with National Grid is maintaining a critical piece of large infrastructure that could impact its bottom line. Plus, the government could curb investor returns too.
Finally, Lloyds shares may be in the doldrums due to economic issues including inflationary pressures, but the longer-term outlook is better. Once interest rates come down and mortgage prospects increase, Lloyds could use its position to win new business. Plus, it is entering the burgeoning build-to-rent market. A dividend yield of 5.7% and a valuation on a P/E ratio of just five is enticing.
The obvious risk is continued volatility hindering performance. However, a fresh threat of an investigation into car finance loan practices could put a serious dent in the bank’s finances. Any fines could hinder investor sentiment and returns.
If I had to start from scratch, these three are some of my best picks to kick off my Stocks and Shares ISA journey to help me build wealth.
