Locating the best stocks to buy in an ISA isn’t an easy task. Modern investors have tens of thousands of stocks, trusts, and funds to choose from in one of these accounts. Some provide excellent opportunities to make money. Many others are simple investor traps.
But targeting huge riches in a Stocks and Shares ISA isn’t an impossible task. The rapidly growing number of ISA millionaires is the perfect illustration of this. Latest data showed there more than 5,000 of these high-net-worth individuals, the number of which has grown 25% in just two years.
So what’s the best way to target a million-pound portfolio today?
Top tips
There’s no standard answer to that question. That’s because investor returns depend on factors like time in the market and the amount of risk you’re willing to take.
However, there are some widely accepted steps Stocks and Shares ISA holders can take to boost their chances of making a magic £1m. These include:
- Maximising each year’s £20,000 annual allowance, and investing early to maximise the compounding effect.
- Reinvesting dividends to bolster ISA growth.
- Choosing quality companies with sustainable profits growth.
- Taking a long-term approach and staying invested across market cycles.
- Owning a diversified portfolio of shares to spread risk and capture different growth and income opportunities.
A great ISA pick?
Opinions on what makes a quality company can differ greatly. It’s why we investors don’t tend to hold all the same shares. But as a rule, there are some key ingredients to look out for. We’re talking about businesses with strong balance sheets, diverse revenue streams, and enormous competitive advantages.
Companies with these characteristics can be better placed to ride out short-term operational problems. And over a longer period, they can rise steadily but surely in value as earnings steadily build.
Take Coca-Cola HBC (LSE:CCH) as a case in point. Over the past decade, it’s delivered an excellent average annual return of 14%, factoring in share price gains and dividends.
There’s many reasons why I love Coca-Cola, and hold it in my own portfolio. It enjoys brand power that no other soft drinks company has, so demand remains high across the economic cycle and grows over time. According to Brand Finance, Coke’s brand power is worth a whopping $46.3bn, more than double that of second-placed Pepsi.
It also has a diverse geographic footprint, operating in 29 developed and emerging markets for stability and growth. And its product offering ranges from coffee and water to fizzy sodas and energy drinks, protecting it from weakness in any one category.
The cherry on top is Coca-Cola’s exceptional cash flows. This gives it money to invest for growth, strengthen its operations, and pay growing dividends, which are all good for the share price.
A stock to consider
But there’s no such thing as a risk-free investment. So what’s the downside here? Well competition is fierce, and there’s no guarantee Coke will remain top of the tree if consumer tastes change. This, and the possibility of sharply rising input costs could play havoc with the firm’s profitability.
Still, I think it’s a top-quality share for all ISA investors to seriously consider today.
