When it comes to investing in a Stocks and Shares ISA, everyone has different goals. Some investors are looking for income now while others are looking to generate capital gains in the long run.
Personally, my objective is to achieve strong, market-beating returns over the long term so I have plenty of money for retirement. Here’s a look at how I’m targeting big gains over the next decade and beyond.
Aiming for big gains
You might think that to obtain big gains in an ISA, you have to invest in highly speculative, risky small-cap stocks (eg penny stocks). But that’s not the case.
Invest in a high-quality growth business that reinvests its earnings for future growth, and hold for the long term (while the company gets bigger and bigger), and the results can be incredible. Just look at Amazon. Over the last decade, this stock has turned a $10,000 investment into around $95,000. That translates to a return of about 25% a year.
This is just one example of a high-quality stock that’s delivered big gains over the long term. There are many more (especially within the US market). Some examples include Mastercard, Intuitive Surgical, and Lam Research. All of these stocks have generated gains of around 20% or more a year over the last decade.
Now I’m not saying that all of these stocks are buys today (I think Amazon and Lam Research are worth considering). But they’re all high-quality growth businesses. They all have competitive advantages, growing profits, and strong balance sheets along with long-term growth drivers. And in the long run, investors have seen huge gains as the companies have increased in size.
My approach
So what I’m doing to target big gains is building a portfolio of these types of high-quality growth stocks. The aim is to hold them for the long term while they get bigger and bigger.
Obviously, not every stock I own is going to perform exceptionally well. But by owning 30-40 different stocks, I can give myself a good chance of landing a few long-term winners.
A stock I’ve been buying
One stock I believe has the potential to be a big winner over the next decade (and is worth considering today) is Nasdaq (NASDAQ: NDAQ). It’s the owner of the tech-focused Nasdaq stock exchange (businesses listed on the exchange pay it ongoing fees), the Nasdaq indexes, and a RegTech business called Adenza.
I see this company as well-placed for growth in our tech-focused world. Looking ahead, we’re likely to see more tech companies emerge as the world becomes more digital. Where are these firms most likely to list? The Nasdaq – home to most of the world’s biggest tech businesses.
The Nasdaq also looks well-placed to benefit from the increasing focus on data. It sells its data to banks, brokerage firms, and asset managers who use it for research and portfolio management.
Additionally, there’s plenty of potential on the RegTech side. Here, Nasdaq helps customers navigate risk management and compliance issues.
Of course, weak market conditions are a risk. They could temporarily reduce demand for the company’s services.
Taking a long-term view however, I’m bullish. It’s worth noting that over the last decade this stock’s returned almost 400%.
