Investing regularly in a Stocks and Shares ISA can be a great way of building wealth or earning passive income. And it can be surprising what a £1,000 monthly investment can become over time.
Someone who achieves a 6% annual return and invests £1,000 per month for 10 years could have a portfolio worth £164,000. But where should investors look for stocks to buy this month?
Admiral
News that inflation is starting to come down has been positive for FTSE 100 insurance company Admiral (LSE:ADM). In the UK, the rate of price increases is at its lowest level since September 2021.
The downside to this is it increases the chances of interest rates coming down. If this happens, the business is unlikely to be able to generate such a good return on the premiums it collects.
But Admiral’s big strength is in its underwriting. The company’s use of telematics has allowed it to price its contracts more effectively than its rivals, leading to better underwriting margins.
This puts the firm in a very strong position. Drivers have to buy insurance from somewhere and a shares in a business that has an advantage in this industry could be a good investment.
Primary Health Properties
FTSE 250 real estate investment trust Primary Health Properties (LSE:PHP) is a very different type of business. But I think it’s another example of a company that has decent long-term prospects.
The company is a real estate investment trust (REIT) that leases a portfolio of GP surgeries. Occupancy levels are consistently high and with most of the rent coming from the NHS, the risk of rent defaults is low.
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.
The business has a lot of debt and this might deter investors. I can see why – the firm will need to figure out what to do about this if interest rates are still high when the time comes to refinance.
As I see it, the worst-case scenario for investors is that the outstanding share count doubles and the dividend halves. Yet that would still be a yield of over 3%, which probably isn’t a disaster.
Which one to choose?
Admiral and Primary Health Properties are different types of business. As such, which one I’d choose to invest in would depend on my ambitions.
If I were looking to build wealth, I’d look for a company that can generate cash and redeploy it at decent rates of return. That’s Admiral.
For passive income, I’d choose Primary Health Properties. Growth isn’t likely to spectacular, but the 7% dividend yield means the stock could be a fine investment even with minimal growth.
Ultimately, which stock I’d opt for would depend on my personal circumstances. But whatever I was aiming to do, I think I could find somewhere to invest £1,000 in a good opportunity this month.
Finding stocks to buy
When it comes to investing, the most important thing is to find a company that has good long-term prospects. And I think both Admiral and Primary Health Properties meet this condition.
From there, it’s about buying the stock and being patient while waiting for returns to develop. That might take time, but quality companies tend to turn out well in the end.
