Markets are volatile. Yet I’d like to encourage you to take a deep breath and think about your long-term financial goals, such as your retirement years. Perhaps you’re about to invest in a Stocks and Shares ISA. Then you’re possibly wondering if the new week could be a good time to put your money to work. Let’s take a closer look.
Stocks and Shares ISA
On 12 March, the FTSE 100 plunged over 10% on its worst day since 1987. Since them, some calm has return to the markets. But none of us can foresee how the new week, or even the year, will end.
However, Britons know we’ve an important investment structure that’s legally designed with tax advantages, i.e., ISAs. Thus, I believe every UK resident should learn more about the different types of ISAs available to them, with an emphasis on Stocks and Shares ISAs.
As our tax year runs from 6 April to 5 April, the deadline for individuals to contribute to the previous year’s ISA is April 5. Yet I’d urge readers to not wait till April next year to start investing in an ISA. Currently, there’s a maximum subscription allowance of £20,000 per adult per tax year.
The rapid decline in stock markets is unnerving for many investors. But it’s also hard to deny that it’s created buying opportunities for long-term portfolios. After all, if you liked a company for robust fundamental reasons and dividends in February, you should really like it even more when its share price is a lot cheaper now.
Are we in a recession?
Even though the market decline makes this potentially an opportune time to invest in many stocks, it’s also important to consider which industries to concentrate on.
We’re beginning to see that corporate earnings may not necessarily perform well over the next few months. And economic numbers across the world suggest a large number of countries may already be in a recession.
As 2019 ended, several City analysts highlighted that we were possibly at the tail end of nearly a decade of economic growth. In spite of a few short-lived downturns over the past 10 years, most economies have enjoyed stable growth since the 2008/09 crisis.
We won’t know when the next recession starts until we’re in it. But, as we’ve been finding out in recent weeks, investor sentiment and the economy can change rather quickly.
If you think an economic slump is upon us, you may want to reconsider your portfolio diversification strategy, including your Stocks and Shares ISA. Certain industries tend to do better in times of slower economic growth.
Investing in a resilient industry
Exactly what traits are common to defensive stocks? A defensive company typically has a constant demand for its products or services. It isn’t correlated to the rest of the business cycle either.
Analysts regard consumer staples companies as defensive. People continue to buy household items, cleaning products and other essentials, such as personal hygiene products, even when their salaries are shrinking. And the Covid-19 outbreak means everyone must pay more attention to basic hygiene than before.
Two stocks to consider for a Stocks and Shares ISA could be Reckitt Benckiser and Unilever. And supermarkets such as Morrisons and Tesco could also be appropriate. All of these companies also offer respectable dividend yields.
