How I’d invest in the best shares now to build a £1m Stocks and Shares ISA

Peter Stephens
·3-min read
Sign pointing towards route to becoming a millionaire.
Sign pointing towards route to becoming a millionaire.

Investing money in the best shares from across the FTSE 100 and FTSE 250 could be a means of improving an investor’s chances of generating a Stocks and Shares ISA worth £1m.

The most attractive shares may be those companies that have the best market and competitive positions. They could provide greater resilience in the short run, as well as stronger growth potential over the coming years.

Investing money in the best shares

Of course, deciding which stocks are the best shares to buy in a Stocks and Shares ISA is highly subjective. Different investors are likely to have differing views on whether a company is high quality relative to its sector peers.

However, the most appealing stocks may have a number of common traits. For example, they’re likely to have sufficient financial resources to not only survive the current economic climate, but to benefit from it.

This may mean they have access to capital that can be used to change their business model. That could mean it’s better aligned with changing consumer tastes. Or, it could mean they have the funds available to invest in sector peers to expand their market position.

Furthermore, the best shares to buy in a Stocks and Shares ISA today are likely to be those businesses that are likely to benefit from long-term growth trends within their sector. For example, they may operate in industries likely to benefit from the increased use of technology. Or even from global trends such as an ageing population.

Building a Stocks and Shares ISA

After identifying the best shares to buy today, it’s crucial to buy them for a fair price. This doesn’t necessarily mean buying them at a large discount to their intrinsic values. After all, it may not be possible to do so after the recent stock market rally.

Moreover, some of the better-quality companies in the FTSE 100 and FTSE 250 may trade at a premium to their peers. However, purchasing stocks at fair prices can be crucial in generating high returns in the long run.

That’s particularly relevant in current stock market conditions. The recent stock market rally has left some companies with high valuations. And that may overestimate their potential to deliver profit growth in the coming years. Avoiding such stocks could lead to more impressive returns for a Stocks and Shares ISA investor.

Making a million from ISA investing

Buying the best shares at fair prices could produce higher returns than those managed by the FTSE 100 and FTSE 250 in the long term. However, even an 8% market return could turn a £20,000 annual ISA investment into a million within 20 years.

As such, with stock prices currently being low, today may be the right time to start buying high-quality shares at prices that don’t reflect their future outlooks.

The post How I’d invest in the best shares now to build a £1m Stocks and Shares ISA appeared first on The Motley Fool UK.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020