How much would a Stocks and Shares ISA have made in the last five years? Half a decade now takes us back to 2021 – hard as that may be to believe! And that means we are covering the tail end of the COVID-19 pandemic, wars erupting across the globe, a brand new technology in AI that threatens to take a sledgehammer to many established industries, along with surging inflation and a cost-of-living crisis.
A Stocks and Shares ISA can’t have done that well over the time period, can it? Or can it?
Unlike a Cash ISA which churns out the same return to every account holder, the Stocks and Shares ISA grows entirely depending on the choices of the investors. To get our answer, therefore, let’s run through a few popular options.
The power
The FTSE 100 is the leading index of the UK, containing 100 of the largest public companies. Investors can get access in a Stocks and Shares ISA through an index fund, which is a bit like investing in all 100 at once. How would it have got on? The base increase was 44%, but if we include reinvested dividends then it jumps to 71%.
A £20,000 stake would have increased to £34,256 in five years.
What about across the pond? American stocks – and the focus on tech giants – have offered some of the best returns going. A S&P 500 index fund would have returned 78% including dividends over the same period.
A £20,000 stake would have turned into £35,640.
Another option is picking individual stocks. Five years ago, an investor could have plumped for Shell and booked a 185% return including dividends, AstraZeneca with 106%, Rio Tinto with 63%, Lloyds with 161%, and Diageo with a decrease of 48%.
The average of these five leading names from the London Stock Exchange would have turned £20,000 into £38,680.
The last example shows the power of stock selection. One or two good choices can elevate the returns. Of course, there is the danger of doing worse than the average too.
Brilliant buys
What type of stocks might offer above-average returns for the next five years? One that has caught my eye recently is Rightmove (LSE: RMV), the online property portal which is listed on the FTSE 100.
Rightmove is one of the UK’s best and brightest tech firms. Like many forward-thinking companies that utilise new technology, the firm has low overheads and high margins. The net margin in the last financial year was a staggering 51%.
The downside of operating what is, when you boil it down, mostly a website, is the lack of an economic moat. Rightmove shares have been struggling recently because of the advances in AI, which might mean people use chatbots to do their property searching instead. The shares have fallen 47% since August.
On the other hand, Rightmove looks firmly entrenched with a share of UK property web traffic standing at over 80%. And that fall in the shares could be a chance to buy in cheap.
To sum up? There will undoubtedly be some brilliant buys on offer right now for a Stocks and Shares ISA. Rightmove very well might end up being one. I’d say it’s worth considering.
