HOW TO TRY AND TURN A SMALL ISA INTO £200K, STARTING IN 2025
At the end of the 2022/2023 tax year, the average ISA balance stood at around £33k. However, averages don’t always tell the full story and there are many people with accounts that are much smaller than this.
Have a small ISA today and keen to build it up to £200k+ in the years ahead? Here’s a simple three-step wealth-building plan to consider.
The right ISA
There are several different types of ISA available today. And some are more powerful than others.
From a wealth-creation perspective, my preferred accounts are the Stocks and Shares ISA and the Lifetime ISA. These can usually allow us to invest in a wide range of assets and potentially grow money at a fast rate.
For those serious about building wealth, these are the types of accounts I think should be considered. It’s worth noting that money can be transferred from a Cash ISA into one of these ISAs without losing the tax-free allowance.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Regular savings
Once the right ISA’s set up, the next step is to establish a regular savings plan. One of the best ways to do this is to work out how much you can afford to save on a monthly basis and then pay yourself first. For example, if you can afford to save £500 after all expenses, transfer this money into your ISA as soon as you’re paid.
This strategy can be very effective. That’s because it makes saving a priority.
An investment strategy
The final step is to develop – and stick to – a decent long-term investment strategy.
Now, there are many different ways to invest today. Personally, I favour a mix of investment funds and individual stocks. Funds can be a good way to get broad exposure to the stock market and generate steady returns over time. Putting the bulk of a portfolio into these means the chances are they’ll do well in the long run.
Meanwhile, stocks can be a great tool to enhance returns. For example, investing in Amazon a decade ago could have boosted returns significantly.
Now, I still reckon Amazon has lots of potential. But one stock I think could do better over the next decade and is worth considering is Uber (NYSE: UBER).
This company is growing rapidly today. For 2025, revenue and earnings per share are projected to rise 16% and 28% respectively. If it can keep growing, investors could see strong gains in the years ahead. Currently, the company’s market-cap’s only $130bn (versus $2.4trn for Amazon) so there’s lots of room for growth.
Of course, Uber may not continue to grow like this. One risk is competition from Tesla (ie its self-driving taxis).
I’m bullish on the long-term growth story though. It’s worth noting that analysts at Goldman Sachs have a price target of $96 for Uber (60% above today’s share price).
£200k in 12 years?
Putting this all together, I believe this strategy has the potential to create substantial wealth over the long run.
Of course, results will vary depending on the savings plan and the returns generated. But I calculate that if an investor puts £800 a month into a Stocks and Shares ISA and is able to achieve a return of 9% a year, they’ll hit £200k in around 12 years.
The post How to try and turn a small ISA into £200k, starting in 2025 appeared first on The Motley Fool UK.
Pound coins for sale — 31 pence?
This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!
Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.
What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?
More reading
- How to target £100,000 in passive income starting with just £1,000
- This S&P 500 stock could rise 57% in 2025, according to Goldman Sachs
Edward Sheldon has positions in Amazon and Uber Technologies. The Motley Fool UK has recommended Amazon, Tesla, and Uber Technologies. John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.
2025-01-01T07:24:05Z
