For long-term investors like me, I think good results can be achieved by time in the stock market rather than by trying to time the market.
So, I’m keen to set up a core part of my portfolio in a Stocks and Shares ISA that aims to match the performance of the general market. And I’d like to put regular money into my investments, such as £100 per month. On top of that, a few carefully selected shares of individual companies could enhance the annualised performance of my overall portfolio over time.
I’d choose top shares and funds like these
These days, there are many low-cost index tracker funds available. And I think they make excellent vehicles for this core part of my overall portfolio. And one of the great things is, many trackers accept a minimum regular saving amount as low as £25. So, I can spread my £100 per month across four tracker funds. And that would help achieve wide diversity across many underlying shares. And it would reflect my view about the long-term potential of each index. I’d choose the following four trackers.
The iShares 100 UK Equity Index aims to track the performance of the FTSE 100 Index. And I think of the Footsie as the UK’s income index. Historically the dividend yield has been above 4%. I’d select the accumulation version of the fund to ensure that all the dividends are automatically ploughed back into my investment. In that way, I’ll be on the road to compounding my returns.
But as well as income, I reckon the FTSE 100 will deliver capital growth in the years and decades ahead. I’m a bull when it comes to the prospects of the UK and its businesses. And I also know that the FTSE 100 started at a level of just 1,000 in January 1984. I reckon there’s the potential for the index to deliver similar performance over the next 37 years or so.
Going for growth
The HSBC FTSE 250 Index tracks the London-listed medium-sized companies. And I reckon the FTSE 250 has many firms that have plenty of growth potential. So, I’d invest in this fund to capture some of that growth from UK businesses. And that would be achieved without risking capital on the more volatile smaller companies on the stock market. Again, I’d choose accumulation to reinvest dividends, as I would with all these trackers.
And I’d like to capture the growth I’m sure will continue in the USA. So, I’d go for the Fidelity Index US. The tracker follows America’s broad index, the S&P 500. And that includes well-known names such as Apple, Microsoft, Amazon, Facebook, Berkshire Hathaway, and many others.
My fourth tracker would aim to explore the potential of other fast-growing markets around the world. So, I’d choose the MSCI Pacific ex-Japan Index. That’s a fast-growing region that has the potential to boost the performance of my portfolio in the long-term.
When it comes to shares of individual companies, I’d go for defensive businesses with growth potential. Right now, I’m keen on paper-based packaging products provider Smurfit Kappa and medical devices and products supplier Smith & Nephew among several other stocks.