Where I’ll be saving and investing my money in 2021

Those in the UK with money to save and invest face no shortage of options in 2021. Here, Edward Sheldon looks at where he’ll be putting his money next year.

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Those with money to save and invest face no shortage of options heading into 2021. Not only are there many saving options (ISAs, pensions, etc), but there are also lots of asset classes and investment structures (funds, ETFs, investment trusts, etc.) to consider.

Here, I’m going to reveal my saving and investing plan for 2021. And look at where I’ll be putting my own money next year.

2021: where I’m going to save

Let me start by explaining where I’m going to save in 2021. I have a simple plan.

First, I plan to contribute £4,000 to my Lifetime ISA to max out my annual allowance. This will get me a near-instant bonus of £1,000. Then, I’ll put my next £4,000 in savings into my wife’s Lifetime ISA (she’ll thank me later). By saving £8k into these ISAs, we’ll pick up government bonuses of £2k, taking the total amount saved to £10k.

After that, I’ll split my savings between my Stocks and Shares ISA and my Self-Invested Personal Pension (SIPP). The advantage of the Stocks and Shares ISA is that it provides a high level of flexibility. This year, for example, I pulled £10k out of my SA to help with a house down-payment. That kind of flexibility is valuable.

The advantage of the SIPP is that it’s extremely tax-efficient. Normally, contributions into a SIPP come with tax relief. However, I actually make contributions directly from my limited company as I’m a freelancer. These are treated as a business expense meaning they reduce my tax bill.

This LISA/Stocks and Shares ISA/SIPP combination works very well for me. I get the bonus top-ups from the LISA, flexibility from the Stocks and Shares ISA, and tax savings from the SIPP. I’ll point out that I use Hargreaves Lansdown for all three accounts, which makes it easy to manage my money.

Where I’ll be investing in 2021

In terms of where I’ll be investing, my preferred asset class is stocks. Over the long-run, stocks tend to generate excellent returns of around 7-10% per year. With that kind of return, money grows quickly.

I don’t just invest in UK stocks however. These days, I am very much a global investor. I mostly invest directly in shares. However, I also invest via funds, ETFs and investment trusts.

In 2021, there are three types of stocks I plan to buy.

  • Large-cap growth stocks. I already own Apple, Microsoft, and Amazon. I’d like to buy more. I’d also like to add some other growth stocks to my portfolio, such as Adobe, Shopify, and Nike.

  • Large-cap dividend stocks such as Unilever, Diageo, and Reckitt Benckiser. These provide me with portfolio stability. And I can reinvest the dividends they pay to compound my wealth.

  • Disruptive small-cap growth stocks. These kinds of stocks are riskier but they have higher growth potential. One small-cap I want to buy more of is Upwork. It operates a freelance employment platform. With the ‘gig economy’ expanding rapidly, I think it has enormous potential.

I’ll point out that I’m not going to buy these kinds of stocks at any valuation. I’ll be waiting patiently for attractive entry points. I’ve found over the years this is the best way to make strong returns from investing in the stock market.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Edward Sheldon owns shares in Apple, Microsoft, Amazon, Unilever, Diageo, Hargreaves Lansdown, Reckitt Benckiser, and Upwork. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon, Apple, Microsoft, Nike, and Shopify. The Motley Fool UK has recommended Diageo, Hargreaves Lansdown, and Unilever and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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