In my opinion, the best buy-and-forget investments are companies in industries that are not changing rapidly.
A business that falls into this bracket is Legal & General (LSE: LGEN). This company is undoubtedly one of the best in the country at what it does. It has been providing life insurance and long-term savings products for customers for over 100 years, and its size is a crucial advantage.
Life insurance and retirement savings are two markets that are not going to change dramatically over the next 10 or even 20 years — two decades from now, people will still need to save for the future.
That’s why I’m confident an investment in this enterprise could help you become an ISA millionaire.
On the road to a million
At the time of writing, shares in Legal support a dividend yield of 7.1% (based on City estimates for 2020). If we take this annual income stream and add on earnings growth of, say, 3% per year, roughly in line with inflation, investors could see an average annual return in the region of 10.1% (assuming all dividends are reinvested) from the shares for the next two decades.
These are just rough, back-of-the-envelope calculations, but I believe they clearly illustrate how an investment in Legal could transform your financial position.
According to my calculations, an investment of £10,000 compounded in an ISA at 10.1% per year could grow to be worth £68,509 between now and 2039. If you devoted your entire ISA to this one investment and added an extra £20,000 a year I calculate an investment in Legal could help you build an ISA worth £1.36m within 20 years.
Of course, putting all of your eggs in one basket isn’t an entirely sensible investment strategy. So, I’m also going to suggest devoting a portion of any investment money to Direct Line (LSE: DLG).
This UK home and car insurance group has similar qualities to Legal in my view. As car insurance is a legal requirement in the UK, it is highly unlikely thay demand for the company’s primary line of business will disappear anytime soon. With this being the case, I believe the stock can churn out good returns for investors for many years to come.
Indeed, at the time of writing, the shares support a dividend yield of 8.7%, which is one of the highest dividend yields in the FTSE 100. At this rate of return, the company doesn’t even need to produce earnings growth for investors to be well rewarded.
I calculate that as long as the company continues to redistribute all of its profits to shareholders via dividends, and shareholders reinvest this cash, a £10,000 investment could grow to be worth £57,000 over a two-decade time horizon. As well as this lofty level of income, the stock also trades at a relatively attractive 10.9 times forward earnings at the time of writing.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.