Revenue at the mid-cap — which supplies the global automotive market — soared 56% to £58m over the year to the end of August thanks to increased demand, new products and growth in international markets such as the US and Japan.

Of course, increasing revenue matters little if a company isn’t also making money. On this front, however, things seem to be going just fine with adjusted pre-tax profit coming in at £13.7m (a superb 59% higher than in the previous financial year).

Although most definitely not a stock for income seekers, it’s worth noting that the total dividend was also hiked 20% to 4.4p per share. A rising cash payout is generally considered a good thing since it implies that management is bullish on the company’s outlook, despite the inevitable reference to “global macroeconomic uncertainty“. Elsewhere, AB’s net cash position had also more than doubled from £15.9m to £36.2m by the end of the reporting period. 

So, why the big drop?

It looks like AB has simply become another victim of its own success. 

The company’s valuation prior to this morning — 53 times earnings for the financial year just gone — was undeniably punchy. Moreover, the consensus estimate from analysts that earnings per share will motor ahead by another 29% in FY20 still leaves the stock on a forecast P/E of 41. While reflective of AB’s ability to generate high operating margins and returns on invested capital, valuations of this kind do rest on everything proceeding as planned with regard to a company’s growth strategy. 

Aside from the above, it must also be remembered that not everyone wants to be invested in great businesses for the long term (we at Fool UK heartily recommend a long-term horizon). With the share price having accelerated 27% in value over the last month alone, some profit-taking was bound to happen. 

That said, today’s 8% decline needs to be seen in context. Since listing back in 2013, the company has generated sensational returns for investors. Had you invested £1,000 within a Stocks and Shares ISA back then, you’d now be sitting on almost £24,000. That’s without taking the positive impact of dividends (which you wouldn’t have paid tax on) into account either!

Personally, I’m more than happy to retain my holding for the foreseeable future. As CEO Dr James Routh stated, the market for Advanced Driver Assistance Systems (ADAS) and autonomous vehicle development is “buoyant” and will surely only get bigger as manufacturers are forced by law to introduce technologies that keep their drivers ever safer. The potential for AB Dynamics, given that it is a leader in what it does, is undeniably huge, and will no doubt be boosted by acquisitions made in the second half of the last financial year. 

As Terry Smith is keen to point out, the price of a stock, while certainly important, is not the most important thing to consider. Far more crucial, in his view and mine, is whether it’s a quality business with excellent potential to increase earnings going forward.

For me, AB Dynamics continues to tick these boxes and I’ll be looking to add to my holding on any further weakness.  

The post I think this multi-bagging growth stock could still help you become an ISA millionaire appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares of AB Dynamics. The Motley Fool UK has recommended AB Dynamics. 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.

However, what these success stories don’t tell you is how many people have also lost everything with forex trading.

High risk, high reward

Forex is the largest financial market in the world. Every single day, more than $5trn of foreign currency is bought and sold, mostly in London. To amplify profits, traders often make use of leverage. Some platforms used to offer leverage ratios of as much as 500x the initial investment. This means a trader with no experience and just £100 could buy and sell up to £50,000 of foreign currency.

The problem with leverage is that while it amplifies gains, it also amplifies losses. This is why so many traders end up losing everything. The forex website DailyFX found that a staggering 96% of forex trading accounts end up getting wiped out.

This ratio implies you might have more chances at the roulette tables. With just a 4% chance of becoming a winning forex trader, playing the foreign currency markets is, in my opinion, akin to gambling. As a result, I think you have a better chance of making a million by investing your hard-earned money instead.

Investing for the future

Investing in high-quality blue-chip stocks and playing the foreign exchange market are two very different things. For one, blue-chip stocks usually offer a dividend yield, whereas you typically have to pay to borrow money with forex trading. Further, based on the assumption that 96% of forex traders lose money, all you would need to do to beat this record is to buy a high-yielding blue-chip stock, like Aviva (current yield of 9%), and hold it for 12 months.

Assuming Aviva’s share price didn’t decline substantially over the year, the chances of you coming out with a positive return are almost guaranteed.

Tracking the market

If you don’t fancy picking stocks, you could always invest in a low-cost FTSE 100 tracker fund. Over the past decade, the FTSE 100 has produced an average annual return for investors of around 7%, turning every £1,000 invested into roughly £2,000. This trend is likely to continue as long as the global economy continues to expand.

And you don’t need to get up early every day and trade for hours to realise these profits. All you need to do is click ‘buy’, sit back, and relax.

Power of compound interest

Thanks to the power of compounding, the returns of this approach really add up over time. A £1,000 lump sum invested in the FTSE 100, growing at 7% per annum for 10 years with an additional £100 contribution every month would, according to my calculations, be worth more than £19,000 at the end of a decade. If you invest £550 a month for 35 years, at a 7% rate of return, you could build a savings pot of just under £1m.

It might take some time to reach this level, but the chances are you would never see the same kind of returns from a forex trading.

The post Don’t gamble with forex trading. I’d aim for a million like this appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Looking ahead, the mid-cap index could continue to post high returns. It appears to offer good value for money, as well as having significant exposure to international markets which may produce stronger growth than in the UK. As such, now could be the right time to buy a range of FTSE 250 shares in order to improve your chances of making a million in the long run.

Low valuation

While the FTSE 250 may have performed well in the last decade, enjoying a bull run alongside other major global indexes, it appears to offer good value for money. For example, it contains a number of companies in a wide range of sectors that offer strong growth prospects at a reasonable price.

Certainly, its price level has been more appealing in the past. But this has often been during periods of extreme stress on the wider economy. Given the encouraging growth prospects for the UK and the world economies despite the variety of risks they face, the index may contain a number of stocks that offer good value for money.

Buying such companies now could enable an investor to improve their risk/reward ratio and boost their chances of generating high returns.

Recovery potential

As mentioned, the UK and world economies currently face risks that include Brexit and a trade war, respectively. Clearly, it’s not possible to know how such events will ultimately play out. However, the FTSE 250 has a strong track record of recovering from bear markets and downturns in the past.

For example, it recovered from the dot com bubble and the financial crisis in the last two decades. Since those downturns, the index has posted record highs as it’s benefitted from improving economic conditions. While Brexit may prove to be a drag on its performance in the near term, the index is likely to follow its long-term trend to post higher highs over the long run.

International growth

With FTSE 250 members having exposure to a wide range of the world’s major economies, the index is geographically diverse. This could help to protect it to some degree in case of disruption in the near term from Brexit. It may also mean its members are able to capitalise on the growth potential that economies such as China offer over the long run.

As such, investing in a range of FTSE 250 shares could be a sound means to boost your portfolio returns. It could even lead to a £1m portfolio in the long run.

The post Why I think investing in FTSE 250 shares is the easiest way to make a million appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Furthermore, the fact that withdrawals from a Stocks and Shares ISA are not subject to tax could make it easier to budget during retirement while also providing improved flexibility versus a pension.

Tax efficiency

While the annual capital gains tax allowance of £12,000 may sound very generous, in the long run it could prove to be surprisingly inadequate for many investors. Contributing even modest sums to the stock market on a regular basis can produce a large nest egg in the long run. And, should you wish to sell stocks after holding them for many years, a gain of more than £12,000 could feasibly be recorded in a single year.

Likewise, the annual dividend allowance of £2,000 may seem to be relatively high today. But for an investor who’s built up a portfolio throughout their life, from which they intend to draw a passive income in older age, dividend taxes can add up and have a significantly negative impact on their financial position in retirement.

As such, a Stocks and Shares ISA’s tax efficiency could save you a significant sum of money in the long run. Its lack of capital gains tax and dividend tax makes it a far more attractive prospect than that sharedealing account.

Simplicity

Perhaps, surprisingly, a Stocks and Shares ISA is no more difficult to open than a sharedealing account. The process generally takes just a few minutes at many providers, while the cost difference between the two products can be as little as the price of one trade per year.

Furthermore, a Stocks and Shares ISA is a simple product to understand. There’s an annual allowance of £20,000, and withdrawals are allowed at any time. There’s no tax payable on capital held within a Stocks and Shares ISA, nor is there any tax paid on withdrawals. Therefore, any investor can benefit from its low costs and tax efficiency, which could make a £1m portfolio a more realistic goal for a wider range of investors.

In addition, the simplicity of a Stocks and Shares ISA could mean an investor is able to focus their attention on the performance of their portfolio, rather than on its administration. This may increase their chances of unearthing the highest-quality stocks in the FTSE 100, as well as being able to benefit from opportune moments to add new stocks to their portfolio. In the long run, this could increase their overall returns and boost their chances of becoming an ISA millionaire.

The post Want to make a million from FTSE 100 shares? I think a Stocks and Shares ISA can help appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

The good news is that if you save regularly, and invest your money wisely, a million-pound ISA portfolio is certainly achievable. Here are some basic calculations that prove it’s possible.

ISA millionaire calculations

Let’s start by assuming you can grow your money at 8% per year over the long run (more on how to achieve this below).

According to my calculations, if you were to save £300 per month, or £3,600 per year, and you earned 8% on your money, you’d hit that million after 41 years. In other words, if you began saving £300 per month aged 25, by 66, you’d be a millionaire.

If you were able to save £500 per month, or £6,000 per year, and you generated a return of 8% on your money, you’d hit one million after 35 years. That means by saving  £500 per month at 30, you’d be a millionaire at 65.

Finally, if you were to boost your savings to a huge £1,000 per month, or £12,000 per year, and generated a return of 8% per year, you would arrive at one million in just 27 years, meaning you could start saving in your early 30s and you’d be a millionaire by 60.

As you can see, with a regular savings plan a million pound ISA is certainly achievable. But how do you generate an 8% return on your money? After all, the best cash savings accounts only pay around 1.5% p.a. in interest right now.

How to generate a return of 8% per year

The answer is simple. You’ll need to invest your money rather than just stick it in a savings account. This means putting your money into growth assets such as shares and funds. Yes, these kinds of assets are riskier than cash savings, but when it comes to investing, risk is related to reward, and these assets have historically generated excellent returns for investors.

With the right mix of growth assets, an 8% return per year shouldn’t be too hard to achieve. The key, in my view, is to build a portfolio that has exposure to a number of different growth assets.

An investment in a FTSE 100 tracker fund probably won’t be enough. You’ll also want to have some exposure to international markets, such as the US, where many world-class companies are listed, as well as some exposure to smaller growth companies, as these tend to generate strong returns over time.

Get your asset allocation right, and you’ll give yourself a great chance of hitting the magic million mark down the track.

The post You can retire with a million in your ISA. Here’s how… appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

However, the outlook for the industry may be less appealing than it once was. After a period of sustained growth, the affordability of housing may be a concern for landlords. Alongside an uncertain economic outlook for the UK that may mean slower growth in rents, now may not be the best time to undertake buy-to-let investments.

Capital growth prospects

The last decade has seen historically-low interest rates make property more affordable for a variety of people. The end result has been house price growth, with a buoyant economy providing confidence to first-time buyers and people looking to move up the property ladder.

Now though, the unaffordability of housing could restrict its potential to deliver capital growth in the coming years. The house-price-to-average-earnings ratio is almost at a record high, while the prospect of rising interest rates may mean mortgage repayments increase over the medium term. This could make it more difficult for first-time buyers to get onto the property ladder, and may mean demand is reduced.

The impact of this on the capital growth prospects for landlords may be significant. The cyclicality of the property market could mean a period of slow growth, or even decline, is now ahead.

Income return potential

While rents have generally followed house prices higher in recent years, this trend may come to an end due to the economic uncertainty faced by the UK. Although employment levels are high and GDP growth has been robust in the last few years, the potential impact of Brexit remains a known unknown.

Certainly, Brexit may prove to be a good thing for the UK economy in the long run. However, it seems to have contributed to weaker consumer confidence in the last couple of years that could produce a more cautious standpoint among people who are considering buying a property.

Furthermore, with tax changes such as reduced scope to offset interest payments against rental income for landlords, the cash flow from buy-to-let investing may be less enticing than it once was.

Buying opportunity

While now may not be the right time to undertake buy-to-let investing, buying shares in a wide range of listed companies could be a shrewd move.

The FTSE 100 and FTSE 250 may have experienced volatile performances in 2019. But with a wide range of stocks offering wide margins of safety and both indexes appearing to be fairly priced even after a decade-long bull market, they could produce higher returns than a buy-to-let. They may also increase your chances of making a million.

The post Warning: buy-to-let may not be your best chance of making a million appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

Both save you from paying any capital gains tax on the profits you make or any income tax on dividends you receive. But does it makes sense to say that one might get you to millionaire status first? In theory, yes.

Make me a millionaire!

Let’s say you start with nothing but can put £400 a month into an ISA that gives an average 7% annual return over 40 years. That will give you a little over £1.03m at the end, according to my calculations.

If you use a SIPP, that £400 will generate an extra £100 in tax relief (if you’re a basic rate taxpayer), essentially bringing your monthly contribution to £500. Here, you’ll have £1.04m rounded up, assuming a 7% annual return but, importantly, after only 38 years.

This example illustrates the power of compounding on two fronts. Firstly, both scenarios show just how powerful the stock market can be as a wealth-generating mechanism compared to something like a standard bank account. The latter may feel more comfortable but, to use an old adage, you must “speculate to accumulate.“

Secondly, that extra £100 of tax relief per month can knock years off the time it takes to hit a million. That may not seem like much compared to the several decades required to build your wealth, but I’d say it’s worth it. 

Am I oversimplifying things? Absolutely. Your actual annual returns will depend on your asset allocation (i.e. how much money you put in shares, bonds, gold etc), the behaviour of markets, and whether your monthly contributions change for better or worse.

On the last point, it’s worth highlighting that you can currently invest up to £20,000 in an ISA per year. A SIPP, on the other hand, allows you to invest up to 100% of your gross annual income up to £40,000. Clearly, the more you can save, the better.

There are a couple of other complications. I’ve not taken anything off for the payment of fees, which can be slightly higher for SIPPs. 

Worth remembering too, is the fact that tax rules can change and the total amount you can save into pensions over your lifetime without triggering extra charges is currently capped at £1.055m.

So SIPP or ISA?

So should you opt for a SIPP? Not necessarily. As with all investment decisions, your account of choice will depend on your financial goals and just how long you intend to keep your money in the market. 

While a SIPP may allow you to reach a million quicker, thanks to more money being compounded, you will eventually be taxed on any withdrawals you make beyond the 25% tax-free lump sum you can receive when you’re 55.

By contrast, you won’t be taxed on withdrawals from an ISA. These can also be made whenever you like, although be aware you may get back less than you invest.

A solution may be to have both types of account, thereby giving you a degree of flexibility while also having the opportunity to shelter up to £60,000 from the taxman and, conceivably, reach the magic million even quicker.

The post ISA vs SIPP: which could make you a millionaire first? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers 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.

Not only do they offer a higher income return today, FTSE 100 dividend stocks also have recovery potential in many cases. They could also deliver high levels of capital growth over the long run.

As such, now could be the right time to buy a range of higher-yielding, large-cap shares, rather than holding on to savings within a Cash ISA.

Income returns

Even though Cash ISA interest rates may have increased in recent months, they are still significantly behind those offered by FTSE 100 dividend stocks. In fact, over a quarter of the index’s members have dividend yields in excess of 5%, at the time of writing. This means an investor could realistically build a diverse portfolio of stocks that, together, have a yield that’s three or even four times the interest rate available on a Cash ISA.

Over the long run, even a modestly higher income return can really add up when compounding is factored in. As such, even if no capital growth is recorded, large-cap income shares could deliver a significantly higher return than cash.

Capital growth

Even though the FTSE 100 may only be trading a few hundred points higher than it did 20 years ago, in the coming years it looks set to post improving returns. In 1999, it was essentially overvalued due to it being in the midst of a wave of investor optimism centred on the dot com bubble. Now, though, the index appears to offer a wide margin of safety. This is evidenced by its 4.5% dividend yield, which is among the highest it’s been in the last couple of decades.

With the world economy forecast to grow rapidly as major economies such as India and China generate strong economic performances, the FTSE 100 could enjoy a tailwind over the long run.

Recovery prospects

While the FTSE 100 may have impressive growth potential, it also has a solid track record of recovery. In other words, even if it goes on to experience a bear market in the near term, there’s a good chance it’ll recover to post higher highs. In fact, it has done so following every recession and challenging period since it was formed.

As a result, investors who are worried about losing money on their investments may be able to reduce the chances of this happening by holding a diverse range of stocks over the long run.

Although a Cash ISA may be a lower risk than investing in the FTSE 100, the latter offers significantly higher returns. As such, for anyone who’s seeking to make a million, investing in blue-chip stocks could be a far more likely means of achieving that goal.

The post 3 reasons why I think making £1m is easier with FTSE 100 dividend stocks than a Cash ISA appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

The answer, in my view, is most definitely yes. That said, to achieve one, you will have to do things a little differently to the average saver, who, in general, starts saving later in life, saves a low percentage of their income, and saves their money in a Cash ISA earning a pittance.

If you want to build up a £1m portfolio by the time you retire, you’ll need to take specific steps that will enable you to get there.

Start saving early

Probably the most important thing to do if your goal is a £1m ISA is to start saving early as this will give you more time to build up your savings pot. Start saving into an ISA at 25, and a million-pound portfolio is definitely a realistic goal by the time you hit your 60s. However, leave saving until your 40s or 50s, and it will become much harder to hit the million-pound mark as unless you’re earning a CEO’s salary, you simply won’t be able to save enough to get there.

Save regularly

It’s also important to save on a regular basis and the best way to ensure you do this is to pay yourself first. So, whenever you receive your salary, immediately transfer out a proportion of your income into your ISA. That way, you won’t be tempted to spend the money and your savings will build up quickly.

Lifetime ISA bonuses

If you’re under the age of 40, it could also be worth considering taking advantage of the bonus money that is available on the Lifetime ISA. With this ISA, you receive a 25% bonus on contributions up to £4,000 per year up to age 50. A bonus of up to £1,000 per year could certainly help you get to ISA millionaire status faster.

Earn a good return

Finally, you’ll need to ensure that your money is working hard for you and earning a good return. The best way to do this? Growth assets such as stocks and funds. You’re able to hold these kinds of assets in both the Stocks and Shares ISA and the Lifetime ISA.

With growth assets, it’s not hard to pick up returns of 6% to 10% per year over the long run, which is far higher than the returns from Cash ISAs. With your money growing at that level, achieving a million-pound ISA becomes far more achievable.

For example, according to my calculations, if you started saving £4,750 per year (less than £100 per week) at age 30, increased your savings by 2% per year every year, and generated a return of 8% on your money, you’d comfortably hit the million mark by age 65.

So in summary, a million-pound ISA is certainly an achievable goal. Save regularly and get your money working for you, and you’ll be well on the way to joining the illustrious ISA Millionaire club.

The post A £1 million ISA: can the average person achieve it? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

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.

However, the outlook for buy-to-let investing is becoming increasingly challenging. Regulatory change, increased taxation and a lack of capital growth potential could mean that buying FTSE 100 dividend stocks is a better move for investors who are seeking to make a million.

Regulatory changes

While buying and letting a property has never been a simple or low-cost process, it’s becoming increasingly difficult. For example, landlords may bear the cost of the end of tenancy fees. From 1 June 2019, new tenancies are not allowed to charge a tenant any fees for things such as credit checks and administration tasks. Estate agents may therefore look to pass them on to landlords in the form of higher management costs.

Alongside this, obtaining a buy-to-let mortgage has become more difficult. In previous years it was possible to do so with a low deposit and limited rental cover compared to the interest being paid on the debt. Today, more stringent rules mean many individuals may struggle to obtain a mortgage – especially on favourable terms. This could reduce the profit potential of a buy-to-let, and ultimately dissuade many people from becoming a landlord.

Tax changes

While investing in FTSE 100 dividend stocks can be undertaken through various tax-efficient products such as an ISA or a SIPP, tax on buy-to-let investing is increasing. An additional rate of stamp duty plus changes to mortgage interest payments being offset against rental income mean the net returns on buy-to-let investing have come under pressure.

Looking ahead, it would not be a major surprise for increasingly onerous taxes to be placed on property investing. There seems to be a political consensus against buy-to-let investors, with a shortage of properties for first-time buyers likely to drive MPs towards further restrictions on buy-to-let landlords. As a result, the net returns from property may come under pressure while it’s possible to pay no tax on investments in the stock market.

Today’s opportunity

While the FTSE 100 may have experienced a bull market for over a decade, there continue to be a number of dividend stocks that offer high yields and low valuations. By contrast, property prices compared to average incomes are towards the upper end of their historic range.

Therefore, now could be a good time to buy FTSE 100 dividend stocks, rather than seek to overcome the variety of challenges that are in place for landlords across the UK. Doing so could lead to higher returns over the long run, as well as lower risks.

The post Forget buy-to-let! I think FTSE 100 dividend stocks could make you a million appeared first on The Twelfth Magpie.

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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.