£20k in a Stocks and Shares ISA? How soon could I turn it into a million?

I’m looking for the top cheap FTSE 100 shares that I think have the best chance of making a million in a Stocks and Shares ISA.

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Some folk already have a million or more in their Stocks and Shares ISA. Well, when I say some, I mean more than 4,000.

The FTSE 100 has been rising in 2024. It’s above 8,000 points now. And we’re too late for all the rock-bottom bargains from the 2020 stock market crash.

Missed the boat? Too late to get on board? Nope. I reckon there are still lots of cheap UK stocks buy now

We only need to look at the size of some dividend yields to get a feel for them.

Don’t be dazzled

I try not to be dazzled by big numbers, though. That can lead to disaster. I only go for businesses that I understand well enough, and that I think can deliver dependable cash flow over the decades.

Phoenix Group Holdings (LSE: PHNX) has an expected yield of a massive 10%. I like the insurance business, but only for the long term — it can be cyclical in the short term.

I think the risk with Phoenix is a bit less than others in the sector, due to the nature of its business. It buys up and manages closed life and pension funds, mostly in the UK. There’s no natural disaster insurance, or anything like that here.

The main reason I don’t have Phoenix in my 2024 ISA is that I already bought some Aviva shares. And with some Lloyds Banking Group in the mix, I’m a bit heavy on financials.

Full ISA allowance

But, suppose I could put my full £20k ISA allowance into Phoenix shares every year, how soon might that get me a million?

I’ll tell you why I’d never actually do that, in just a moment.

But if I did, and if the 10% yield kept up, I could reach a million in about 18-and-a-half years.

Neither the dividend nor the share price are likely to stay the same though. We only need to look at the five-year share price chart to see that.

What am I missing?

That’s part of what holds me back from going too big into one stock.

And the big investors aren’t stupid. This dividend yield isn’t high just because the folk in the City are too dumb to spot it.

No, it’s like that for good reasons, the key being risk. Financial stocks, like Phoenix Group, are still sailing in very unsure waters.

I think it could take two or three years, or even more, before we see how inflation, interest rates, and the economy in general are going to go. And in that time banks, insurers and other financials could remain volatile.

Footsie returns

So, I insist on a good amount of diversification in my investments. And that means I’ll never make a million from one high-yield stock.

But over the past 20 years, the FTSE 100 has produced an average total annual return of 6.9%. That could still get me to a million in 22 years, based on investing the full ISA annual limit.

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 positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc. 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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