How I’d invest £20,000 in a Stocks and Shares ISA today to help build long-term wealth

One of the main reasons I invest in the stock market is to try and increase my wealth over the long term. I find a Stocks and Shares ISA can be a convenient vehicle to do that.

By investing my money now and allowing it to work for years and decades to come, I hope it will help me earn a solid profit.

As an example, if I want to put £20,000 into an ISA now and try to build wealth, this is how I would go about it.

Balance risk and reward

No matter how many good investment choices I make, if I make some really bad ones, I can still lose money.

So the mindset I would take to investing ISAs is about focusing not only on the potential reward, but also how the risk matches your personal tolerance. For example, if AFC Energy can successfully commercialize fuel cell technology, I share that it can do very well. But I see a significant risk that the company will burn through cash, or struggle to grow profitably.

By contrast, established energy companies like SSE and National Grid have a profit. When I see less potential upside for them if they live up to their full potential compared to small in AFC, I also think the risk is lower (although there are still some risks, as with the company).

Pick a big company and go fishing

I want to keep the Stocks and Shares ISA diversified as a way to reduce the risk if some of the choices end up disappointing. £20,000 is ideal for this, because it comfortably allows me to diversify between five to 10 companies, for example.

But if I have bought what I see as a great company at attractive prices for my ISA, I will take a more hands-off approach. However, I will still check from time to time, to see if the development has significantly changed the investment case I see for any shares.

But beyond that, I would just take a long-term investment mindset. By making smart choices and then allowing time to take effect, I hope my investment choices will help me build wealth over time. That means I can put money away through an ISA and then spend time relaxing and enjoying myself instead of fretting over every move in share prices.

Build wealth

How exactly will I try to build wealth using this approach? There are some tacks I can take here.

One would invest in growth stocks and hope that at least some of them produce the phenomenal returns seen in companies like Amazon and Tesla the first era.

A different approach is to invest in income stocks, then compound the dividends. If I put £20,000 in a Stocks and Shares ISA today and compound it at 10% per year, after 25 years I should be sitting on an ISA worth over £200,000!