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How I’d invest £20k in a Stocks and Shares ISA

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The new tax year begins on April 6. So, if you’ve not done so already, now is the time to make the most of your Stocks and Shares ISA allowance for the current financial year.

Investors can own any assets inside a Stocks and Shares ISA as long as they are traded on a recognised stock exchange. This essentially means any developed country’s stock market.

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As such, there are thousands of investments to choose from.

The best investments for your portfolio will depend on your own personal risk tolerance and investment horizon. However, for most investors, a selection of low-cost passive market tracker funds might be the best option.

Building a Stocks and Shares ISA

If you want to build a Stocks and Shares ISA portfolio at the click of a button, there are some options. Fund management powerhouse Vanguard’s LifeStrategy funds allow investors to build a diversified portfolio at the click of a button.

The LifeStrategy 60% Equity Fund is invested 60% in global equities 40% in global bonds. It charges an annual management fee of 0.22% per annum. Including recent market declines, over the past five years, the fund has turned an investment of £10,000 into £13,000.

That’s not bad for a fund that requires little to no management effort on your part.

If the LifeStrategy offering is not for you, there are plenty of other options. For example, a FTSE All-Share tracker fund will give you exposure to nearly 600 of the largest publicly-traded companies in the UK.

It might be better to own this investment alongside an international index fund inside a Stocks and Shares ISA. An S&P 500 tracker fund is a good alternative. Together these investments would give you exposure to the 1,100 largest public businesses in the UK and US.

Investment trusts are another alternative. Investment trusts are perfect for long term investors, because many of them have already been around for decades, so they know how to act in a crisis.

Today investors can buy investment trusts that own everything from commercial property to physical precious metals and even other funds inside a Stocks and Shares ISA.

If you do choose to go down the investment trust route, it might be sensible to own a portfolio of three or four. This diversification would minimise risk, and hopefully improve your long term returns.

A marathon, not a sprint

Whichever investment route you decide to take, it is essential to keep in mind that investing is a marathon, not a sprint.

Low-cost index funds might not look sexy or produce huge returns overnight. Nevertheless, successful investing is all about protecting and growing your capital over the long run.

High-risk penny stocks might offer the prospect of significant returns in a short time frame. But more often than not, these companies end up wiping out their shareholders.

The best way to protect your hard-earned money is to own a well-diversified portfolio of high-quality businesses. It’s imperative to keep that in mind when you’re picking investments for your Stocks and Shares ISA.

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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.

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