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I regularly invest in a stocks and shares ISA and have done so for many years. But I often wonder how much I could have made ten years ago if I had added more funds.
That’s what I want to know today.
It really depends on what I have invested. If I buy a FTSE 100 Index fund, I calculated that I turned £10,000 into £18,270. That includes both price gains and dividends.
Doesn’t sound like a bad comeback to me. But looking closer, I found some interesting points.
FTSE 100 vs Nasdaq 100
The FTSE 100 was far from a mainstream stock market. For example, tech-heavy Nasad 100 £10,000 would have turned into a much higher £43,000.
The difference in performance has a lot to do with their composition. The FTSE 100 includes many banks, oil companies and consumer stocks. Nasdaq, on the other hand, is full of technology and high growth stocks.
The last decade has been a particularly good environment for US tech stocks. Ultra-low interest rates and high growth rates were key drivers.
That said, looking at his footy, he has more than average returns. There were many top-performing stocks that managed double-digit returns.
Raising a Stocks and Shares ISA
Let’s say ten years ago, I looked at the FTSE 100 and decided to buy it take it easy, AstraZeneca, CRH, Intercontinental Hotels Group And Admiral Group. I think I could have made 14% annual profit. That £10,000 is enough to turn a stocks and shares ISA into a maximum of £37,000.
Note that there are other FTSE 100 stocks with annualized returns in excess of 35%. But, crucially, they weren’t in this large-cap index a decade ago. Many of the current best performers were at the middle end FTSE 250 Pointer at the time.
Small companies grow fast. It’s no surprise that some of its biggest performers have made it into the FTSE 100.
Remember that smaller companies can be more flexible. If I own one, I want it to be comfortable with a great deal of price.
Shares I buy
So that brings me to my next question. If I invested £10,000 in a Stocks and Shares ISA today, what would I buy? I am looking for high quality and profitable companies. They must show growing revenues and a strong balance sheet.
I also like to see what the famous investor Warren Buffett calls moat. That’s a sustainable competitive advantage. It is the quality that allows high profits to continue for a period of time.
Now, they include the FTSE 250 stocks that meet my criteria and that I buy in the future, GreggsAnd Games Workshop. From the FTSE 100, I buy Take it right, Howden joining group And Rio Tinto.