I think the Stocks and Shares ISA — along with the Lifetime ISA and Cash ISA — are excellent products with which to build long-term wealth. And yet there are still millions of people in the UK who are not making the most of them.
Today, a staggering 23,966,331 of British adults don’t currently have an ISA. That represents 53% of the country’s adult population, according to financial services provider Shepherds Friendly.
Even more alarmingly is news that one in seven Brits have no savings at all. However, this is perhaps no surprise: as Derence Lee, Shepherds Friendly’s chief finance operator, comments: “having money can be a challenge for many of us, even more so in the context of the current financial climate“.
ISA benefits
Those who can afford to invest in an ISA can enjoy some great perks. Not only do owners of these financial products pay ZERO income or capital gains tax (CGT) on savings of up to £20,000 a year, in the case of Lifetime ISAs, investors receive a 20% top up — which is essentially free money — from the government.
£0 to £632,980 in 28 years
The earlier one starts on their investing journey, the better a chance they have of building a healthy nest egg by retirement. This is thanks to the mathematical miracle of compounding, where those who reinvest their dividends supercharge their wealth by earning interest on their interest.
But it’s never too late to start investing. Indeed, even those with just a few decades until their planned retirement date can build a big fund for retirement.
One tactic could be to build a balanced portfolio of FTSE 100 and FTSE 250 shares using an ISA. The average long-term return of these two indexes stands at 9.25%, a figure that could — if this record continues — potentially build a 40-year-old a £632,980 retirement pot by the time they reach 70.
That’s assuming a regular investment of £400 per month investment and the reinvestment of any dividends.
A FTSE 100 share to buy
There are literally hundreds of top stocks investors can choose from today. One I already own in my ISA — and which I’m hoping to increase my holdings in at the next opportunity — is Ashtead Group (LSE:AHT).
The rental equipment provider isn’t having the best of times right now. Its shares have slumped on Tuesday as the business cut its revenues growth forecast for the full year: it now expects sales to rise at the bottom end of its 11% to 13% guided range.
Tough conditions in the emergency response and entertainment markets could persist. But I think the near-8% decline in Ashtead’s share price represents an attractive dip buying opportunity.
The company has delivered an impressive 555% return during the past decade, according to Hargreaves Lansdown. And I expect it to continue delivering the goods for its investors given the solid outlook for the US construction industry, and the scope it has for more acquisitions.
Buying top shares like this in my tax-efficient ISA could make a real difference to my financial situation come retirement.
