A Shares and Shares ISA is the proper automobile for making an attempt to construct wealth over the long run. That’s why I spend money on one each month, come rain or shine.

Right here, I’ll define three methods that buyers would possibly wish to think about for an ISA.

The revenue method

The primary is one targeted upon shares that pay dividends. As I transfer into center age (insert crying face emoji), dividends are starting to kind a much bigger a part of my general portfolio technique.

John D. Rockefeller purportedly mentioned: “Do you know the only thing that gives me pleasure? It’s to see my dividends coming in.”

I don’t know if I’d go that far — I additionally derive a whole lot of pleasure from consuming pizza — but it surely’s actually good to see revenue flowing passively into my ISA.

When reinvested, dividends gasoline compounding. For instance, a £20,000 ISA that yields a median 7% would develop to £39,343 after 10 years, as a result of energy of reinvested dividends and compound curiosity.

By then, that 7%-yielding portfolio can be producing roughly £2,754 in annual dividends.

In fact, dividends are by no means assured to be paid. Due to this fact, it’s essential to have a diversified revenue portfolio, with a number of dividend-payers.

However right here’s the rub: high-yield revenue shares hardly ever go up a lot in worth. That’s as a result of these blue-chip corporations are typically in mature industries the place development alternatives are restricted.

For instance, ever-popular Lloyds shares provide a 5.4% yield, however have fallen 14% in worth over 5 years. Poor ongoing share price efficiency like this might scale back general returns. That is price contemplating.

Go-go development

The second method is to spend money on shares with a lot increased development prospects. These shares have the potential to provide life-changing returns over the long run.

Certainly, each few years, a handful of development shares rise exponentially and make early backers so much richer.

Nvidia inventory, for instance, is up 2,085% in simply 5 years!

The catch right here is that many of those shares solely appear to be no-brainer buys with the advantage of hindsight. And it’s simpler mentioned than executed to maintain holding a inventory that’s already up massively. The temptation to take some chips off the desk will be overwhelming.

Lastly, development shares are hardly ever low-cost. So there’s the very actual hazard of massively overpaying for a corporation that out of the blue stops rising or by no means turns a revenue.

For each Nvidia, there are a whole lot of development shares that lose buyers cash.

Little bit of each

A 3rd method I’m a fan of is investing in development shares that pay a decent yield. One I personal is Greggs (LSE: GRG). Shares of the beloved baker are up 21% in 5 years.

Nevertheless, the agency has a wonderful document of elevating its annual dividend. With the inventory yielding 2.4%, these payouts can bump up the general return.

Greggs’ long-term aim is to function 4,000+ retailers throughout the UK, up from 2,559 in September. So the corporate nonetheless seems to have loads of development potential left within the tank.

One potential danger is the upcoming hike in minimal pay and nationwide insurance coverage contributions. To offset these prices, Greggs should add a few cents to its merchandise, doubtlessly impacting gross sales.

General although, I reckon Greggs inventory presents an ideal stability of development and revenue potential.