The Motley Fool

Here’s how I’d invest £1,000 in an ISA to beat the FTSE 100 in 2020

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Compass pointing towards 'best price'
Image source: Getty Images.

The FTSE 100’s performance in 2019 was stunning. The index recorded a rise of 12% during the calendar year. When its dividend is added to that figure, the FTSE 100’s total return for the year was around 16%. That’s almost twice as much as its annualised total return since inception, and shows that many investors will have enjoyed a profitable 2019.

Looking ahead, the index continues to offer good value for money in many instances. Alongside this, there appears to be strong growth potential for companies operating within the UK and in international markets. By focusing on such companies, it may be possible for you to beat the index in 2020 and generate high returns within a tax-efficient product such as a Stocks and Shares ISA.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Low valuations

Despite its strong rise in 2019 and the bull market experienced over the past decade, the FTSE 100 continues to offer good value for money. For example, the index has a dividend yield of 4.4% at the present time. This is much higher than its historic average, and suggests that the index could offer further capital growth potential over the medium term.

Additionally, many of the index’s members currently trade on low valuations compared to their historic averages. This may be because of the uncertainty that has surrounded the UK and world economies in recent months. In many cases, stocks with low valuations have bright growth prospects that could mean investors have priced-in the risks they face. For long-term investors, this could present numerous buying opportunities that enable them to improve the risk/reward ratio of their portfolios.

Growth potential

Although the UK economy faces continued political uncertainty in 2020, it is expected to deliver relatively encouraging performance compared to 2019. For example, GDP growth is forecast to be similar to last year, while data such as unemployment figures and wage growth could prove to be more robust than many investors are anticipating. This could mean that those FTSE 100 companies that have exposure to the local economy deliver bottom-line growth that merits a higher share price level.

Similarly, the global economic outlook could prove to be relatively positive. The world economy is expected to grow at a faster pace in 2020 than in 2019. Since many of the FTSE 100’s members have exposure to fast-growing economies such as India and China, they could benefit from rising demand for their products and services over the next 12 months.

Outlook

The FTSE 100 could deliver further impressive capital growth in 2020. Through purchasing those large-cap shares that trade on low valuations and that have exposure to fast-growing economies, it may be possible for you to outperform the wider index. In doing so, you may be able to improve your financial future – especially when investing through a tax-efficient product such as a Stocks and Shares ISA.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Peter Stephens has no position in any of the shares 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.