How to grow an empty Stocks and Shares ISA to £100k

Zaven Boyrazian cuts through the fluff and breaks down the path to building a £100k Stocks and Shares ISA through regular monthly investing.

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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.

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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.

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A Stocks and Shares ISA is one of the most powerful tools in a British investor’s arsenal. Apart from granting access to stock markets around the world, all capital gains and dividends can be enjoyed without HMRC knocking on the door. And subsequently, reaching £100,000 for the first time becomes far easier without taxes disrupting the wealth-building process.

But how exactly can investors reach this milestone? Let’s explore the options.

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.

The paths to a £100k portfolio

Investing involves a lot of diverse opinions and strategies. Arguably, one of the most popular in 2024 is capitalising on index trackers. These low-cost funds enable investors to mimic the returns of a benchmark index without having to worry about research, portfolio management, or diversification.

The FTSE 100 is often a popular destination for those seeking a more stable journey, with the S&P 500 offering greater returns at the cost of higher volatility. Looking at the latter, investors have enjoyed an average return of around 10% per year. And investing £500 a month at this rate, would build a £100k portfolio in under a decade.

While having a six-figure portfolio is undoubtedly exciting, waiting around for 10 years doesn’t exactly sound thrilling. And not everyone has the luxury to contribute more capital each month. Fortunately, there is an alternative way to accelerate the wealth-building process.

Stocking picking for higher returns

Index investing provides a near-hands-off experience. And it’s a proven strategy for building long-term wealth. However, since investors are simply copying an index, it’s impossible to achieve market-beating returns.

So, instead of owning such a basket of companies, investors can construct their own portfolios from individual businesses. By only buying top-notch firms at sensible prices, it’s possible to unlock superior gains, although it’s not guaranteed. That’s how legendary investors like Warren Buffett have built staggering fortunes. And even if an investor only musters an extra 2%, that can make a massive difference to wealth in the long run.

Of course, the opposite can also happen. Making bad investment decisions can potentially compromise a portfolio to the point where it not only loses to the market but ends up destroying wealth. In other words, stock picking offers the potential for greater returns at the cost of higher risk.

A top stock to buy now?

Continuing with the S&P 500, the US index has had a terrific run so far this year, rising by more than 15%. This stellar performance has been driven by a lot of factors. But shares of Nvidia (NASDAQ:NVDA) definitely had a significant role. After all, it’s the second-largest stock in the index, and it’s up by almost 160% over the same period!

To put that into perspective, a £1,000 investment in January would now be worth £2,600. These gains are being driven by the excitement surrounding AI. Since Nvidia’s products are a critical component to powering AI models, it’s no surprise that the company has made a killing.

But while the underlying business is undoubtedly top-notch, the current share price demands a pretty lofty premium. So much so that in the last three months, insiders, including the CEO, have been selling their shares by the millions. That’s a signal that the share price has got a bit too far ahead of itself. And therefore, it may be worthwhile looking elsewhere for opportunities right now.

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.

Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Nvidia. 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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