The London Stock Exchange is packed with thousands of shares, investment trusts, and exchange-traded funds (ETFs). So much so, the challenge isn’t finding investment opportunities, but narrowing them down.
With this in mind, here are two ETFs that I reckon are worth considering for a £20,000 Stocks and Shares ISA.
A ready-made portfolio of dividend payers
First up is the iShares UK Dividend UCITS ETF (LSE: IUKD). This gives diversified exposure to high-yield income stocks from the Footsie and FTSE 250.
It currently has 51 holdings, including British American Tobacco, Legal & General, BP, Aviva, Lloyds, and HSBC. The dividend yield is 5.32%, comfortably above the FTSE 100‘s 3.4%.
In practice, this means the ETF is offering £532 in annual income from a £10,000 investment. Then there’s the possibility of share price appreciation on top, though markets do fall as well as rise, of course.
Now, one risk here is that the focus is solely on dividend stocks listed in the UK. Therefore, if this type of share suddenly falls out of favour, the ETF would underperform. Plus, another pandemic-type event could see many companies suspend dividends again.
However, I’m encouraged by the share price performance here. Over five years, the iShares UK Dividend ETF is up around 50%. Adding in the income too, that’s a solid return.
Looking at the portfolio, which contains many cheap UK shares, I think the ETF will carry on doing well in future.
The robots are coming
Next is the iShares Automation & Robotics UCITS ETF (LSE: RBTX). As the name implies, this tracks global companies dedicated to automation and robotics innovation (140 of them).
This area is expected to enjoy robust growth over the next decade due to manufacturing and warehouse automation, industrial Internet of Things, self-driving cars, and intelligent software that can execute tasks autonomously (AI agents).
Top holdings include Nvidia and Advanced Micro Devices (AMD), the chipmakers that provide the computational muscle behind everything from AI chatbots to humanoid robots.
On the industrial side, Rockwell Automation and Emerson Electric are powering the next generation of smart manufacturing, while Intuitive Surgical is a pioneer in robotic-assisted surgery.
ServiceNow and Snowflake are involved with AI agents in one way or another. As Amazon CEO Andy Jassy recently said: “Many of these agents have yet to be built, but make no mistake, they’re coming, and coming fast.”
Since its launch in 2016, the iShares Automation & Robotics ETF is up 210%. That’s impressive, while the ongoing charge of 0.40 % is reasonable for a high-quality thematic ETF, in my opinion.
As for risks, areas of the robotics industry can be cyclical, so a global slowdown could dent performance for a while. Also, nearly 69% of the fund is in technology stocks, meaning any sell-off in that sector would impact the fund.
Looking ahead, however, I’m bullish on this ETF’s prospects. There’s a good mixture of large and smaller business across hardware, software, and industrial engineering.
Nvidia CEO Jensen Huang has declared that “we are at the beginning of a new industrial revolution“. This ETF offers bags of exposure to this, making it worth considering for a growth-oriented ISA.
