How I’d invest £20k in a Stocks and Shares ISA in 2024

If Edward Sheldon was investing £20k in a Stocks and Shares ISA today, he’d split the capital between funds and growth shares.

| More on:
Calendar showing the date of 5th April on desk in a house

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

Stocks and Shares ISAs are brilliant investment vehicles. Not only can an investor access a wide range of assets (stocks, funds, investment trusts, etc) but they can also invest completely tax-free.

Of course, the challenge is working out where to invest as there are so many options. With that in mind, here’s a look at how I’d invest £20,000 in one of these ISAs (for the long term) today.

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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Balancing risk and reward

One portfolio construction strategy I’m a big fan of is ‘core-satellite’ investing. This involves putting the bulk of the money into broad market-based investments such as global equity funds (‘core’ investments) and then a little bit of capital into more exciting – and potentially more lucrative – investments (‘satellite’ investments) to strike a balance between growth and risk.

If I was investing £20,000 in an ISA today, I’d use this approach. By allocating a substantial amount of my capital to global equity funds, I could lower my risk levels dramatically and hopefully avoid catastrophic losses. Meanwhile, by putting some money into more adventurous investments, I could potentially generate higher returns and beat the market.

Core investments

As for the core part of my investment, I’d go for a selection of investment funds. One tracker fund I’d probably go for is the Vanguard FTSE Global All Cap Index. With this product, I could get access to 7,000 stocks for very low fees.

Meanwhile, on the actively-managed side, I’d probably go for Fundsmith Equity. This fund – which is focused on high-quality stocks – has a higher fee but has an excellent, market-beating, long-term track record.

I’d allocate 75% of my £20,000 to the core funds, leaving me with 25% of my money (£5,000) for more exciting investments.

Satellite investments

As for the satellite investments, I’d focus on technology stocks. Because the world is only going to become more digitalised in the years ahead.

And one stock I’d allocate some capital to is Amazon (NASDAQ: AMZN), which is a leader in e-commerce, cloud computing, artificial intelligence (AI), and several other areas of technology.

Amazon stock has essentially been ‘dead money’ for the last two-and-a-quarter years. After experiencing a big drop in 2022 as interest rates surged, it has taken a while to recover.

I reckon it’s poised for its next leg higher however. The reason I say this is that after years of cost cutting, the company’s profits are now surging. This year, for example, the company is expected to generate a net profit of $44bn – 45% higher than last year.

At the same time, its valuation is at historically low levels. Currently, the forward-looking price-to-earnings (P/E) ratio is just 44 (falling to 35 using next year’s earnings forecast). That’s high by UK standards, but low for Amazon, which has historically been a very disruptive company.

Of course, investing in individual companies involves a higher level of risk. And one major risk here is a slowdown in cloud spending by businesses. This could hit revenue and profit growth.

Taking a long-term view however, I’m very bullish on Amazon. I reckon it has bags of potential in today’s digital world.

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.

Edward Sheldon has positions in Amazon and Fundsmith Equity. The Motley Fool UK has recommended Amazon. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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

Businessman use electronic pen writing rising colorful graph from 2023 to 2024 year of business planning and stock investment growth concept.
Investing Articles

Could the FTSE 100 be set to soar in 2024?

The FTSE 100 keeps threatening to go off on a growth spree. And weak sentiment keeps holding it back. But…

Read more »

Investing Articles

Is this FTSE 100 stalwart the perfect buy for my Stocks and Shares ISA?

As Shell considers leaving London for a New York listing. Stephen Wright wonders whether there’s an undervalued opportunity for his…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

3 things I’d do now to start buying shares

Christopher Ruane explains three steps he'd take to start buying shares for the very first time, if he'd never invested…

Read more »

Investing Articles

Investing £300 a month in FTSE shares could bag me £1,046 monthly passive income

Sumayya Mansoor explains how she’s looking to create an additional income stream through dividend-paying FTSE stocks to build wealth.

Read more »

Investing Articles

£10K to invest? Here’s how I’d turn that into £4,404 annual passive income

This Fool explains how using a £10K lump sum can turn into a passive income stream worth thousands for her…

Read more »

Investing Articles

1 magnificent FTSE 100 stock investors should consider buying

This Fool explains why this FTSE 100 stock is one for investors to seriously consider with its amazing brand power…

Read more »

Rainbow foil balloon of the number two on pink background
Investing For Beginners

2 under-the-radar FTSE 100 stocks under £2

Jon Smith identifies two FTSE 100 stocks that he believes are getting a lack of attention from some investors but…

Read more »

Investing Articles

£8,000 in savings? I’d use it as a start to aim for £30k a year in passive income

Here's how regular investing in the UK stock market, over the long term, could help us build up some nice…

Read more »