The can be a very powerful wealth-building tool. These accounts typically offer access to a vast range of investments, and any gains and income generated within them are completely . Want to see an example of how this type of ISA can be used to build wealth? Here’s a look at how much capital that could potentially be accumulated putting £750 a month into one of these products for the next 10 years.
ISA returns can vary With a Stocks and Shares ISA, returns can vary significantly depending on the chosen investments. Pick the right mix of funds and/or stocks and it’s possible to achieve returns of more than 10% a year. Invest in the wrong assets, on the other hand, and you could be looking at low single-digit or even negative returns.
In the chart below, I show how much a £750 contribution a month could grow to at different rates of return. At 5% a year, it could grow to around £115k. At 8% a year, it would grow to around £130k.
Meanwhile, at 11% a year, it would grow to around £150k. Bear in the mind that the total amount of contributions over 10 years would be £90,000 (£9k a year). So in some cases, we’re looking at considerable capital gains (tax-free in the ISA).
Now, with a sound investment strategy, achieving a 8% annual return isn’t so difficult. Typically, the stock market (as a whole) tends to generate returns of around 7-10% a year over the long term. So with a global tracker fund such as the , an 8% return could be very achievable.
It’s worth noting .