How I’d invest £20k in a Stocks and Shares ISA

The letters ISA (Individual Savings Account) on dice on stacks of gold coins on a white background.
Stocks and Shares ISAs are among the best tools available for investors who want to save for the future. Individuals can deposit £20,000 a year into one of these tax-efficient wrappers. The allowance renews every tax year.

Any income or capital gains earned on the investments held inside an ISA aren’t liable for tax. Investors don’t even have to declare the income on their tax returns.

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I try and use as much of my allowance as possible every year, as it’s a use-it-or-lose-it allocation. Any unused allowance isn’t rolled over.

With that in mind, this is how I’d invest my annual allowance of £20,000 this year.

Stocks and Shares ISA investing

The first thing I want to do is to build some international exposure into my portfolio. While investors can hold some global shares in a Stocks and Shares ISA, I’d rather own an investment fund and let its managers do the hard work for me.

Two trusts I’d buy are the Monks Investment Trust and the Scottish Mortgage Investment Trust. Both of these have an international investment mandate and are searching for high-quality growth stocks worldwide. While investors should never use past performance to guide future potential, they both have a solid track record of finding underappreciated growth companies.

As well as these international trusts, I’d also acquire some UK-focused investment funds. One trust I’d buy is the City of London. This is a top income trust and owns a portfolio of high-yield blue-chip shares.

Alongside this blue-chip trust, I’d also acquire a small-cap-focused investment fund. Investing in smaller companies can be challenging, and I’d rather leave it to the experts who have more time to pick equities. The BlackRock UK Smaller Companies Fund has an excellent track record of finding these businesses.

Those are the trusts I’d buy for my Stocks and Shares ISA. I’d invest around half of my portfolio in these funds. The rest I’d invest in a portfolio of my favourite individual equities.

Company investing

I want to invest in companies that may benefit from major trends as we advance. For example, I’d buy Biffa, a leader in the recycling, an industry that’s becoming ever more important. I’d also require energy business SSE, which is becoming one of the country’s foremost renewable energy companies.

Alongside these enterprises, I’d also want to build exposure to the healthcare sector. Hikma is one of the world’s largest producers of low-cost generic medications. I think the demand for these products will increase as the global population grows.

And finally, I’d buy Computacenter. The IT infrastructure supplier has seen the demand for its services explode as companies have been forced to improve their technology during the pandemic. As the world becomes more digitised, I think this trend will continue.

I’d buy these individual companies for my Stocks and Shares ISA, but they may not be suitable for all investors. They could face significant challenges going forward, including higher costs, competition and even additional regulations, restricting profitability.

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