There are many different strategies investors could use to deploy £5,000 in a Stocks and Shares ISA. The most uncomplicated approach is to buy a low-cost global passive tracker fund. This strategy is perfectly acceptable to track the performance of global equity markets.
However, the one drawback of this approach is that global equity funds tend to be heavily weighted to the US. This is the world’s largest equity market, after all. There’s nothing wrong with this approach. It’s a straightforward strategy that has the potential to generate positive returns in the long term.
Personally, this isn’t a strategy I’d favour. I’m willing to spend a bit more time and effort finding investments. In particular, I’m looking for funds and equities that have historically outperformed the broader market.
Stocks and Shares ISA buys
While past performance should never be used to guide future potential, it can be a good starting point for further research.
However, this strategy’s unlikely to be suitable for all investors as it requires extra effort. Nevertheless, I’m entirely comfortable with using this approach for my Stocks and Shares ISA.
Some of the investments I’d buy with a lump sum of £5,000 include the Scottish Mortgage Investment Trust. This trust has a fantastic record of picking global growth stocks, and it can invest around the world. It also has a portfolio of private companies, which provides an additional layer of diversification.
Over the past five years, the trust’s returned nearly 356%, compared to a return of 86% for the FTSE All World Index.
Another trust I’d buy, which is managed by the same asset manager Baillie Gifford, is the Scottish American Investment Company. This trust also has a diverse investment mandate. It owns equities, real estate and bonds. Once again, its track record stands testament to the strategy. The trust has produced a return of 99% over the past five years, compared to the 86% for the FTSE All World Index.
Although I’d buy these investment trusts for my Stocks and Shares ISA with £5,000, they might not suit all investors. Some might not be comfortable with a manager picking investments for them. There’ll always be a risk that the manager could choose the wrong assets, incurring losses.
Individual equities
As well as these investment trusts, I’d also buy a selection of high-quality stocks for my portfolio.
Some stocks I’d buy for my Stocks and Shares ISA include AstraZeneca and BP. I think both companies could offer the perfect mix of income and growth as we advance. Other options include magazine publisher Future. I think this enterprise has tremendous potential as it builds on its e-commerce strategy.
Of course, these companies may not live up to my growth expectations, but I’m comfortable owning the equities in my diverse portfolio.