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Forget a cash ISA. I’d rather buy these two FTSE 100 shares in a Lifetime ISA

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Since a cash ISA currently offers a return of around 1.5% per year, there could be better risk/reward opportunities available elsewhere. Certainly, FTSE 100 shares such as Unilever (LSE: ULVR) and Reckitt Benckiser (LSE: RB) may have greater risk than a cash ISA. But when purchased through a Lifetime ISA, the government bonus of up to £1,000 per annum could help to make them a more worthwhile investing opportunity.

The two companies also appear to offer strong growth prospects, while recent updates have suggested that their strategies are being successfully executed. As such, now could be the right time to buy them for the long term.

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Emerging growth

While investing in emerging markets is not a new idea, it could continue to be a worthwhile move. Countries such as China and India are expected to deliver high GDP growth over the long run, with their populations becoming increasing wealthy as wages rise. This could equate to higher demand for a variety of consumer goods, thereby providing a tailwind for operators in the sector.

With Unilever and Reckitt Benckiser having invested heavily in a number of developing economies, they seem to be well-placed to benefit from rising disposable incomes. This could impact positively on their growth rates not only in the current year, but also over the long term. As such, they may be able to generate above-average earnings growth for a sustained period of time, which could lead to a higher valuation.

Diversity

With the prospects for the UK economy being uncertain at the present time, having a diverse portfolio of investments could be a shrewd move. Doing so may help to reduce the total risk of a portfolio, and could also improve its stability.

Since Unilever and Reckitt Benckiser have exposure to a wide range of countries across the globe, they are not reliant on one specific region for their sales. This could mean that weakness in one area is offset by strength in another, so the end result is relatively stable growth. This could help to reduce the volatility which is a feature of investing in the stock market, and could provide a more resilient growth outlook than many of the two companies’ FTSE 100 index peers.

Returns

Of course, the main reason why buying Unilever and Reckitt Benckiser in a Lifetime ISA may be a better idea than having a cash ISA is their return potential. Over the last decade, they have recorded an annualised capital growth rate of 12% (Unilever) and 8% (Reckitt Benckiser). When dividends are added, those figures increase to a level that a cash ISA would take many years to achieve.

As such, while the two shares may have greater risk than a cash ISA, their risk/return ratios could be highly appealing. That’s especially the case when a Lifetime ISA is used, with the government bonus providing an extra incentive to buy at the present time.

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Peter Stephens owns shares of Reckitt Benckiser and Unilever. The Motley Fool UK owns shares of and has recommended Unilever. 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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