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In the UK, there are many different investment vehicles that can be used to build wealth for the future. There’s the Stocks and Shares ISA, the Lifetime ISA, the Self-Invested Personal Pension (SIPP), general investment accounts (GIAs), the Cash ISA, and more.
Personally, I invest in a Stocks and Shares ISA, a Lifetime ISA, and a SIPP. Here’s why I like to use the three different types of accounts to grow my wealth.
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My main retirement account
My SIPP is my main retirement account. I contribute every month. It has three main advantages. The first is there’s no tax payable on investment gains through share price rises or on dividends (but tax is payable on withdrawals in retirement)
The next is that I get tax relief (top-ups from the government) when I make personal contributions. If I make a contribution directly from my limited company, I pay less tax there.
The third is that it offers access to a ton of different investments. So overall, it’s a powerful vehicle.
Additional retirement savings
I see my Lifetime ISA as an additional retirement account. I also contribute every month here.
Like the SIPP, this offers access to a broad range of investments. And no tax is payable on gains or income.
Where it has an advantage over the SIPP, however, is that money can be accessed at 60 tax-free. That’s a big perk.
Another great feature of this account – which has a £4k annual allowance – is that contributions come with a 25% bonus from the government. So, by putting in £4,000, I pick up an extra £1,000.
A more flexible investment account
Finally, I have my Stocks and Shares ISA. I see this as a more flexible investment account as I can access my money if I need to (unlike with the SIPP and the Lifetime ISA).
With this type of account, I could potentially contribute £16,000 per year (after making a £4,000 contribution to my Lifetime ISA). And there would be no tax on income or gains.
My investment strategy
As for my strategy, I’m invested in a mix of funds and individual stocks. In terms of funds, I own both index funds and actively-managed products. With the stocks, my focus is on quality and growth. I’m looking for highly profitable companies with competitive advantages that are likely to get much bigger in the years ahead.
One company I’ve been investing in recently is international payments business Wise (LSE: WISE). I personally use its platform all the time to send money to friends and family overseas and I think it’s brilliant.
In the long run, I see plenty of potential for growth here. With the company continually lowering fees for customers, I reckon it will capture market share from competitors in the years ahead.
New products and services could also help to boost growth. It’s worth noting that the company is reportedly considering a UK banking licence.
One downside to this stock is that it has a high valuation. Currently, the forward-looking price-to-earnings (P/E) ratio is about 30. That doesn’t leave much room for a slowdown in growth, which could occur if the global economy tanks.
I’m comfortable with the high valuation, however, as I believe that revenues and earnings will climb substantially in the years ahead. To my mind, this stock has bags of potential and I think it’s worth a closer look.
