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How I’d find the best shares to buy now and hold forever in a Stocks and Shares ISA

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A buy-and-hold strategy could be a sound means of building a Stocks and Shares ISA that ultimately provides a worthwhile passive income in older age.

The past returns of the stock market show that a portfolio of UK shares has generally produced an annualised total return in the high-single digits. When compounded, this can produce a surprisingly large nest egg.

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However, finding the best shares to buy now for such a strategy could be a tough task. The economic outlook is uncertain, and many companies are experiencing tough prospects.

By searching for high-quality dividend shares in unloved sectors, an investor may be able to unearth the most attractive companies for the long run.

Searching in unloved sectors for Stocks and Shares ISA investments

Some of the best shares to buy now in a Stocks and Shares ISA could be in unpopular sectors. For example, the banking, resources and retail industries are currently experiencing tough periods. And that’s likely to produce falling sales and profitability in the current year.

However, history shows that such operating conditions are unlikely to last in perpetuity. The economy is very likely to fully recover from its present crisis. This could mean operating conditions for those industries, as well as many others, improve dramatically in the coming years. The result of this could be rising profitability for incumbents that encourage higher share prices over the long run.

As such, buying companies with solid financial positions and dominant market positions for a Stocks and Shares ISA could be a shrewd move. They may be able to ride out present challenges to benefit from a long-term economic recovery.

Focusing on dividend stocks for the long term

Dividend shares could be worth buying and holding in a Stocks and Shares ISA. They could gain in popularity over the coming years because of a lack of passive income opportunities available elsewhere. For example, cash and bonds now provide relatively low income returns that may mean they’re unsuitable for many income investors.

Furthermore, many dividend shares may be able to raise shareholder payouts as the economy recovers. This could make them increasingly attractive to a wide range of investors. Certainly as they may see rising dividends as a sign of confidence among management and stronger financial prospects. This may catalyse their stock market value and produce further capital growth for investors.

Therefore, even if a Stocks and Shares ISA investor isn’t concerned about receiving an income in the short run, dividend shares could be worth buying. They could become increasingly popular over the coming years. And this may prompt high total returns relative to the wider stock market. This may also increase the size of an investor’s ISA and improve their financial situation in the long run.

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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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