When looking at ways to invest in the stock market, opening a Stocks and Shares ISA is one way of making the most out of what I invest.
Stocks and Shares ISAs have a number of tax benefits, with every adult in the UK having a tax-free allowance of £20,000 which they can use in any tax year.
Like many, I may not be able to take full advantage of that allowance, but that doesn’t mean I can’t gain from investing in a Stocks and Shares ISA with just £1,000.
As with any stocks and shares investment, it must be noted that the value of my investment has the potential to fall as well as rise. With that in mind, here’s how I would invest £1,000 in my ISA today.
One way I would start investing in my Stocks and Shares ISA is through big, reputable UK companies, which I can find in the FTSE 100 and FTSE 250.
These indexes contain some of the longest operating, highest value companies in the UK, and many have historic records of share price growth. It is true that past performance is not an indicator of future performance, but I like to look at household names that have consistently shown profit and share price growth over the years.
UK banks have struggled in the stock market in recent years as economic uncertainty caused by Brexit and Covid-19 has taken its toll. I’d still look to buy finance stocks for my ISA, as I think the economic outlook will improve in the years to come.
For example, Barclays (LSE: BARC) is one of longest-running companies in the UK. The bank’s share price has bounced back in 2021 as optimism around Covid-19 vaccines grows.
The company reinstated its dividend last month and profits were higher than analysts had expected, although they were lower that in the previous year.
Barclays does have plenty to worry about, though. The company was hit with £4.8bn of impairment charges as a result of Covid-19. The banking sector is fragile right now, and is susceptible to further setbacks if there are more economic woes ahead.
There may be short-term economic turbulence but I see enough value in Barclays shares right now to add to my Stocks and Shares ISA.
Another company from the Footsie which I would buy for my ISA is Unilever (LSE:ULVR). While the household supplies maker may not itself be a household name, many of its brands are.
With names such as Domestos and Hellmann’s in its portfolio, there aren’t many people who don’t come into contact with Unilever products regularly.
The Unilever share price has a track record of growth, matched by earnings and dividend growth. The last 12 months have seen an increase in sales of home hygiene products in particular. I think this trend will continue as people will be more conscious about hygiene, even after the Covid-19 threat has subsided.
Unilever shares have seen weakness in the first quarter of 2021 however. Profits have fallen short of analyst expectations recently, and investors may be looking to recovery stocks rather than defensive stocks right now.
While the company may not see a massive turnaround like some companies will as the economy reopens, in the long term I think Unilever can continue to grow and provide returns on investment.