I think the FTSE 100 could produce positive total returns for investors in 2021. As the global economy recovers from the pandemic, I reckon some of the index’s primary constituents, such as mining and banking companies, will benefit from increased economic activity.
However, I don’t think the growth will be limited to blue-chip companies. I reckon smaller corporations could yield higher returns. And it’s these businesses I’d buy for an ISA in 2021.
How I plan to beat the FTSE 100
I want to invest in a few themes this year. These include e-commerce, technology and renewable energy. These industries are all booming, and companies with exposure are reporting explosive sales growth.
Unfortunately, these sectors aren’t widely represented in the FTSE 100. The index is dominated by finance and mining companies. These firms may prosper in their own ways during the year ahead. But I don’t believe they’ll come anywhere close to replicating the growth in technology and renewable energy sectors.
As such, there are a couple of businesses I’d buy in an ISA to outperform the FTSE 100. In the tech sector, I’d like to own Softcat and Computacenter. These businesses are committed to helping customers manage and develop their IT infrastructure. As the world becomes more and more connected, I think the demand for their services will only grow.
For similar reasons, I also like the look of Avast. This business provides anti-virus software and products. The global cybersecurity market has grown at a rate of 10% per annum over the past decade and, as the tech sector continues to expand, it doesn’t seem to me as if this growth will slow anytime soon. That’s why I’d want to own Avast, or one of its peers in the sector.
Renewable energy investments
In the renewables market, Greencoat UK Wind is, in my opinion, one of the best ways to earn an income directly from wind energy. A more diversified investment in the sector is FTSE 100 utility provider SSE. This business is planning to invest billions over the next few years building out its renewables business.
Finally, in e-commerce, I think there are two clear sector winners. Asos and Boohoo have both been able to rise to and meet the pandemic’s challenges. Their sales have boomed as a result. Next also seems to have coped well. The firm’s investments in infrastructure over the past five years have helped it cope with increased demand. Further investment is planned. This should help the business boost growth in the years ahead.
I reckon all of the companies above will build on their pandemic gains in 2021, which is why I’d buy them in an ISA. The tax benefits of owning these shares in an ISA may only increase investors’ returns.