The big advantage of a Stocks and Shares ISA is that protects investments from taxes on capital gains on dividends. And I’m aiming to get mine up to £1,000,000 in assets.
That won’t be straightforward – and investment returns are never guaranteed. But I have a plan for getting there before I reach retirement age (in 2056).
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The road to a million
The road to a million is different for different people. The long-term average return from the FTSE 100 has been 6.5% – enough to get someone who invests £1,000 each month to £1,000,000 in 30 years.
My situation is different in two ways. The amount I have available each month is likely to vary – the way my income and outgoings work, I expect to be investing more in some months than others.
The second is I’m not starting from scratch. So I’m hopeful that I can get to £1,000,000 by 2056 even if I don’t manage to find £1,000 every month to buy shares with.
Those two things mean I need to think carefully about how to go about investing. But I have a plan that I think gives me a decent chance of hitting my target.
My investment plan
The uneven nature of my income means I have a choice – I can either invest my cash as I get it, or I can try to spread it out to offset the unevenness. And I know what I plan on doing here.
Over the long term, I think holding excess cash – beyond what I need for my ordinary expenses and some for emergencies – is likely to weigh on my overall returns. So I’m looking to deploy it in the stock market as soon as I can.
There is, however, a caveat – I’m only willing to invest if I think I can manage at least the 6.5% return the FTSE 100 has been offering over the last couple of decades.
Below that and it becomes less clear that the potential rewards are not worth the inherent risk of buying stocks. Fortunately, I think there are some decent opportunities available at the moment.
A UK small-cap
FW Thorpe (LSE:TFW) is a stock I’ve been looking at recently – and I like what I’m seeing. The firm is a collection of businesses that manufacture specialist lighting solutions for industrial settings.
The firm focuses on industries with regulatory requirements. Whether it’s healthcare settings or road tunnels, lighting needs to meet specific standards and this creates a barrier to entry for competitors.
While FW Thorpe has benefitted from lighting solutions moving from fluorescents to LEDs, this is now largely complete. That means there’s a risk growth might be slower in the future.
An ongoing shift to smart lighting as part of industry 4.0, however, could be the next boost for the company. And with the stock down 22% over the last 12 months, I think it also looks like good value.
Building a portfolio
I don’t have cash available to invest right now – and I’m not willing to sell any of the investments in my Stocks and Shares ISA. But FW Thorpe is a company that has been catching my eye recently.
I think there’s a good chance it can generate the 6.5% return I’m looking for. So there’s a good chance I’ll be adding it to my portfolio when I’m looking for stocks to buy later this month.
