Here’s how I can invest a £20k Stocks and Shares ISA to help build long-term wealth

Investing for the long term makes a lot of sense to me. What appears to be a good investment in the short term can sometimes turn out to be wrong brilliant long lasting. So when I choose companies to buy using my Stocks and Shares ISA, I keep an eye on how I think they might do a decade from now (or even longer).

With that in mind, if I had £20k to invest in an ISA and wanted to try and build wealth over the long term, here’s the approach I would take.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.

Setting a long-term growth strategy

I started by deciding which path to take. For example, instead of putting all my money into my best investment idea, I can diversify into five to 10 different stocks.

I would look for businesses that I felt had limited growth potential but had high profitability that were likely to last, or that I thought could continue to grow. In addition, I would buy stocks that I felt were attractively priced – and that I considered holding for years.

In practice, that may not happen. Company performance can change, sometimes unexpectedly. But, as a general rule, my approach will be to take a buy and hold approach in my Stocks and Dividends ISA, rather than trading regularly.

Finding the right stocks to buy

As an example of the type of share I think investors should consider buying for an ISA to target long-term growth, I’ll use one of my own, Legal & General (LSE: LGEN).

It benefits from something I like when buying stocks for the long term, which is a target market that is already large and looks set to grow over time. That is the market for financial services linked to retirement.

Within that market, Legal & General can differentiate itself due to its unique brand recognition, long history, and large customer base. Focusing on retirement has helped give Legal & General even more credibility in that space than when it was a generalist insurer, in my opinion.

Are there any risks? That’s right. There is always any assignment. In Legal & General, this includes market downturns that hurt investors’ interest in their policies. That can hurt revenue and profitability. But, on balance, I see this as a solid firm with an attractive price tag.

Using money to get money

Legal & General has been a disappointing performer over the past five years, down 22%.

That fall is part of the reason I think the current share price is attractive. But I also like it FTSE 100 paid a dividend of 9.6 %.

To help build wealth over time, I will keep such shares in my ISA. Not only are there potential tax benefits in using such benefits as an additional source of funds within my Stocks and Shares ISA on top of my annual allowance, I also think compounding can help me build wealth quickly.