Here’s how an investor could target a £230k ISA fund with a £226 monthly investment!

By providing protection from capital gains tax and dividend tax, the Stocks and Shares ISA and Lifetime ISA can significantly boost an individual’s chances of building long-term wealth.

Even someone with £226 a month to invest in UK shares, funds and trusts has an opportunity to make a six-figure retirement fund. This is the average amount that modern Britons currently save each month, according to NatWest.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Decision time

The first thing to consider is what sort of ISA to use. The Lifetime ISA can be opened by those aged 18-39, and those who invest receive a tasty government top-up (£1 for every £4 the account holder deposits).

However, there are also government penalties of 25% on withdrawals before the age of 60, for any reason other than buying a first home. What’s more, Lifetime ISAs can also be contributed to only up to the age of 50.

Stocks and Shares ISAs meanwhile, don’t feature government charges or age restrictions beyond 18. But on the downside, they also don’t include that lovely top-up like the Lifetime ISA.

It’s worth mentioning that the Stocks and Shares ISA annual contribution limit is £20k versus £4k for the Lifetime ISA. But for our person targeting a £226 monthly investment, this isn’t a problem.

The plan

The good news is that Britons can hold one of each of these ISAs to contain shares and other assets. So if they choose to, our regular investor could use both to try and maximise their returns.

Here’s how this could work in practice. Let’s say our person has just turned 35 and plans to retire at the State Pension age of 68. They have no plans to pull money out before they reach retirement, so don’t have to worry about withdrawal charges on the Lifetime ISA.

They could invest £226 for 15 years in a Lifetime ISA, until the cut-off age of 50. After this point, they could continue investing using a Stocks and Shares ISA.

If they achieved an average annual return of 9% with their investments, they would — over that 23-year period — have a total retirement fund of £229,826 spread across both ISAs (including government top-ups).

Global perspective

With a diversified selection of shares, funds and trusts, history shows us that this 9% figure’s a realistic target. Remember though that past performance is no guarantee of future returns.

The iShares Core MSCI World ETF (LSE:IWDG) could be one great exchange-traded fund (ETF) to consider today. This pooled investment has delivered an average annual return of 10.8% since its creation in 2017.

If this continues, our investor would have an even better £277,363 to retire on by the time they hit 68.

This global ETF has holdings in 1,353 companies across the globe and spanning different sectors. These range from US information technology specialists Nvidia and Apple, to Japanese motor manufacturer Toyota, UK consumer goods giant Unilever and Swiss healthcare provider Novartis.

Funds like this can still decline in value during broader stock market downturns. This particular one has declined 3.1% since the start of March.

But over the long term, their ability to capture investment opportunities while also spreading risk can be an effective way to build a big ISA