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I believe a stocks and shares ISA is an excellent investment vehicle to help build wealth. If you're a regular reader, you may know that it's a Foolish favourite.
Let me explain why I'm a fan and describe a stock I'd love to buy to help me make the most of my ISA.
Why this ISA?
There are a few reasons why this particular type of ISA appeals to me. When it comes to building wealth, dividends are a great way to help me achieve this.
If I buy shares within the ISA, the dividends I receive are not taxed, meaning I can keep them, which helps me accumulate money quickly. I could even let them compound over a number of years to really let that money grow.
Please note that tax treatment depends on each client's individual circumstances and may be subject to 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. Readers are responsible for conducting their own due diligence and obtaining professional advice before making any investment decision.
The other attractive aspect of the ISA is the generous allowance I can invest. Over the course of a year, I can invest up to £20,000. I may not have £20,000 each year, but if I have funds available to invest, I could build up to that amount. This gives me great flexibility to really put my money to work and help me build wealth for the future.
Infrastructure construction
When I have some funds to invest, I will buy BBGI Infrastructure (LSE:BBGI) shares for my own ISA.
As the name suggests, BBGI is a publicly traded investment company. FTSE 250 Index which invests in infrastructure projects around the world. It covers territories such as Europe, North America and Australia. The type of infrastructure includes essential services such as roads, hospitals and schools.
Shares have gone up and down over the past 12 months, as a result of higher interest rates, inflation and general economic turmoil. They are pretty much where they started, from 133p this time last year to 132p today.
This brings me directly to my bearish view of the business and the issues that could impact earnings and returns. Unfortunately, economic problems and higher interest rates and inflation can lead to spending cuts, especially on large infrastructure projects. BBGI could see its earnings and returns affected by the current malaise we find ourselves in.
Moving on to the other side of the coin, BBGI does possess defensive attributes, in my opinion. This is due to the essential nature of the projects it invests in, in addition to the fact that they are backed by the government. This can add a layer of security to the overall project.
From a fundamental standpoint, a 6.2% dividend yield is extremely attractive. To put this into context, FTSE 100 Index The average is 3.6%. However, I understand that dividends are never guaranteed. In addition, the stock is currently trading at a 10% discount to its current net asset value, which is another point in favour of my investment argument.
Overall, BBGI has a good presence, solid fundamentals and a potentially lucrative business model for the next few years. This could help the dividends flow as I grow my ISA and build wealth.
