I regularly invest in a Stocks and Shares ISA and have been doing so for many years. But I often wonder how much I could have made if I’d added more funds a decade ago.
That’s what I want to find out today.
It very much depends on what I’d invested in. If I’d bought a FTSE 100 index fund, I calculate that I’d have turned £10,000 into £18,270. That includes both price gains and dividends.
It doesn’t sound like a bad return to me. But taking a closer look, I found some interesting points.
FTSE 100 vs Nasdaq 100
The FTSE 100 was far from the best performing major stock market. For instance, the tech-heavy Nasdaq 100 would have turned £10,000 into a much greater £43,000.
The difference in performance has much to do with their composition. The FTSE 100 includes many banks, oil companies and consumer shares. The Nasdaq, by contrast, is filled with far more technology and high-growth stocks.
The past decade has been a particularly good environment for US technology shares. Ultra-low interest rates and high levels of growth have been key drivers.
That said, looking at the Footsie, there’s more to it than just its average return. There were many high-achieving shares that managed a double-digit return.
Growing a Stocks and Shares ISA
A decade ago, let’s say I’d looked at the FTSE 100 and decided to buy RELX, Astrazeneca, CRH, Intercontinental Hotels Group and Admiral Group. I calculate I would have been able to achieve a 14% annual return. That’s enough to turn a £10,000 Stocks and Shares ISA into a considerable £37,000.
Bear in mind there are other FTSE 100 shares that managed a whopping 35% annual return. But, crucially, they weren’t in this large-cap index a decade ago. Many of its current best performers were in the mid-cap FTSE 250 index at the time.
Smaller companies tend to grow faster. It’s no wonder that some of its greatest achievers managed to gallop their way into the FTSE 100.
Bear in mind that smaller companies can often be more volatile too. I’d need to be comfortable with greater swings in price if I owned any.
Shares I’d buy
So that brings me onto my next question. If I invested £10,000 in a Stocks and Shares ISA today, what would I buy? I’d look for high-quality, and profitable companies. They should demonstrate growing earnings and a strong balance sheet.
I’d also like to see what popular investor Warren Buffett calls a moat. That’s a sustainable competitive advantage. It’s a quality that should enable high profits to continue for quite some time.
Right now, FTSE 250 stocks that meet my criteria and that I’d buy include Future, Greggs, and Games Workshop. From the FTSE 100, I’d buy Rightmove, Howden Joinery Group and Rio Tinto.