Although it might be the right path for some, buy-to-let is a tough investment to make and manage. I am willing to bet that for the majority looking to build wealth, a Stocks and Shares ISA built around FTSE 100 stocks might be a better option. ISAs are easy to open. You can build up ISA wealth gradually, investing any amount regularly and spread the risk across multiple stocks.
Compare the ease of ISA investment with the work required for buy-to-let. First, you have to buy the property. That usually means getting a mortgage and making repayments. Next, you have to find reliable tenants because missed rent payments could make mortgage repayments difficult. Then there are the costs of maintaining the property.
In the long run, an ISA portfolio can swell to quite a size, and yes, there are ISA millionaires out there. That portfolio can provide income, via dividends, in retirement. If you want to cash the portfolio in, it’s as simple as clicking ‘sell’ on your ISA provider’s website – compare that to trying to sell a house.
So if the idea of a Stocks and Shares ISA sounds appealing, here are two FTSE 100 stocks that I would buy and hold inside one.
Informa your ISA
Right now, the Informa (LSE: INF) share price of 428p looks like a bargain. The coronavirus crisis shut down Informa’s events business, and events deliver about 65% of revenues, which explains why the shares are trading 49% lower than there were a year ago.
However, subscription-linked businesses account for 35% of Informa’s revenues, and these have continued to trade well. A recent £1bn equity raise has strengthened the balance sheet, at the cost of diluting shareholders. Informa has not had to ask its debtholders for any favours as yet.
A healthy balance sheet and ongoing subscription businesses are buying time for Informa’s events business to get back on track. Investors like to look for catalysts to get a share price moving and being allowed to host events will be such an event for the Informa share price.
The prospect of a return for some major events in China from this month onwards is a welcome sign. The long term prospects look good for Informa with 90% of analysts rate it as a buy. Since the share price is so low at present, they reckon investors could make 88%+ over the next 12 months by investing in this FTSE 100 share.
A FTSE 100 stock with a difference
Shares in Scottish Mortgage Trust (LSE: SMT) have returned 64% over the last year, comfortably beating the FTSE 100’s return of -18%. The rather drab title of the company is at odds with its business of maintaining a rather exciting investment portfolio. Buying shares in Scottish Mortage gets you access to this portfolio, which is overseen by an experienced management team.
A Stocks and Shares ISA is probably going to be built around UK-listed companies, many of them in the FTSE 100 index. Buying Scottish Mortage trust shares gains an investor exposure to companies listed in the US, Europe, and China. There is also exposure to unlisted companies. Both of these attributes will help to diversify a portfolio of publically traded, UK-based shares.
Scottish Mortage’s investments could be volatile in the future. Investors will need to invest for at least five years and have the patience to allow any temporary share price slumps to correct themselves.