It’s a new tax year, and I’m ready to start filling up my Stocks and Shares ISA with £20,000 before next April. However, transferring money into my account is the easy step. Figuring out where to invest it is the real challenge. And it can be quite a daunting one, especially for beginners.
With that in mind, let’s explore my investing strategy for the next 12 months.
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.
Investing with patience
Having a large stash of uninvested cash isn’t the most ideal situation to be in. After all, with elevated inflation chipping away at its value, the importance of putting my money to work is higher than usual. But a mistake I’ve made in the past is to invest it all in one go.
That can be a lucrative approach, especially when stock prices are low like they appear to be today. However, it also limits my ability to take advantage of buying opportunities whenever they may appear throughout the rest of the year. And these opportunities can sometimes be far more lucrative in the long run.
Therefore, I’m going to be breaking up my Stocks and Shares ISA allowance into four chunks of £5,000. Then every quarter, I’ll invest my capital into what I believe to be the best opportunities at that time. With this approach, I may miss out on lower stock prices.
But suppose the stock market takes another downturn at some point later this year? In that case, by distributing my investments throughout 2022, I can take advantage and potentially maximise my returns.
Picking companies for my Stocks and Shares ISA
With my 2022 investing plan laid out, it’s time to actually decide which companies I’m interested in buying. And often the best place to start is by looking at the companies I already own. Personally, I always begin with my losers. Which stocks have performed poorly? And, more importantly, why?
Often short-term disruptions to operations are enough to send a stock plummeting. But if the long-term strategy hasn’t been compromised, the drop in share price can be an excellent buying opportunity. That won’t always be the case, and this process can sometimes reveal companies that might need to face the chopping block.
If I can’t find any exciting opportunities from my losers, I move on to my winners. What’s behind their recent momentum? And is it sustainable over the long term? If the answer is yes, then maybe now could be an excellent time to double down since winners tend to keep on winning.
After exhausting the opportunity already in my Stocks and Shares ISA, I begin my quest to find new investment opportunities within the stock market. Specifically, I’m looking for businesses that have solid financials, wide competitive moats, and a talented management team at the helm.
High-growth opportunities
I’m willing to take on a bit of risk with my portfolio. So I tend to be more drawn toward growth stocks rather than income. Volatility comes with the territory. But over the long term, if these businesses meet their full potential, the returns can be well worth the risk.
Examples of some companies on my watchlist that might fit these criteria are:
- Ocado – An online grocery company investing heavily in warehouse automation.
- Focusrite – An industry-leading audio equipment business.
- Treatt – A speciality chemicals company helping to eliminate sugar from soft drinks.
