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I consider a stocks and Shares ISA to be one of the best investment vehicles available to British investors.
Every investor in the UK is entitled to an allowance of £20,000 each year. If I decided to withdraw my money, I wouldn't pay a cent in taxes.
Let's say I have a blank canvas with my stocks and Shares ISA. Three stocks I would love to buy are B&M (LSE:BME), National Network (LSE: NG.), and Lloyds Banking Groupp (LSE: LLOY).
This is why!
What they do
B&M is a thriving discount retailer that has grown enormously in recent years. National Grid is the owner and operator of the gas and electricity transmission system in the United Kingdom. Lloyds is one of the UK's largest banks and the country's largest mortgage provider.
So how have all three stocks performed over the last 12 months?
B&M shares are up 13% in this period from 424p to current levels of 528p. National Grid shares are down just 3% from 1,071p to current levels of 1,031p. Last but not least, Lloyds shares are down 13% from 51p to current levels of 44p.
The investment case
B&M has taken full advantage of consumers looking to stretch their budgets further in recent years and the rise in popularity of discount retailers. Organic and acquisition-based growth has driven the stock up FTSE 100 index.
Currently, B&M shares offer a dividend yield of 6.5% and the stock is trading at a price-to-earnings ratio of 15, which is attractive.
Conversely, if the turmoil calms down and people have more money to spend, might they shy away from discount retailers? Furthermore, as B&M seeks to expand in Europe, risks of failed acquisitions or poor performance could harm investor confidence and profitability.
National Grid's monopoly and defensive capabilities are its two main attractions for me. After all, everyone needs energy. The stock offers a yield of over 5% and trades with a P/E ratio of just five.
The risk with National Grid is maintaining a critical piece of large infrastructure that could affect its bottom line. Additionally, the government could also curb investor returns.
Finally, Lloyds shares may be in the doldrums due to economic issues, including inflationary pressures, but the long-term outlook is better. Once interest rates fall and mortgage prospects rise, Lloyds could use its position to win new business. Additionally, it is entering the booming build-to-rent market. A dividend yield of 5.7% and a valuation with a P/E ratio of just five are attractive.
The obvious risk is that continued volatility hampers performance. However, a new threat from an investigation into auto finance lending practices could severely impact the bank's finances. Any fine could harm investor confidence and profitability.
If I were to start from scratch, these three are some of my top picks to start my stocks and Shares ISA journey and help me build wealth.