What I’m doing with my Stocks & Shares ISA during the market slump

Jon Smith talks through what he’s doing with his Stocks and Shares ISA at the moment, with opportunities a-plenty, despite the market dip.

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It’s been a tough month for the FTSE 100 and stock markets around the world. From being above 7,600 points less than a month ago, the FTSE 100 is now below 7,200 points. This market slump can be frustrating when I look at my existing portfolio in my Stocks and Shares ISA. However, there are several things that I’m doing now with my ISA to take advantage.

Using fresh cash to buy on the cheap

Firstly, I’m making use of unused cash that I have in my ISA. I wrote last month about how I was putting spare cash in the ISA ahead of the deadline. Each year, I’m allowed to invest £20,000 in my ISA. This period tracks the tax year and runs April to April. As I hadn’t used all of my allocation, I put some money in the ISA ready to be used for this year. And I could still take advantage of any spare money I now have with my £20,000 allocation for this year.

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With this new money, I can take advantage of the slump to buy stocks I like at cheaper prices. Over the past month, Rightmove, ITV, Auto Trader, JD Sports and Scottish Mortgage Investment Trust have all lost over 10% in value. I think this represents a good short-term dip for me to buy these shares.

A benefit of holding these in my ISA is that I don’t pay capital gains tax when I come to sell the stocks in the future. In theory, if I can buy the shares when they’re undervalued, the savings on tax will be larger as my profit should be higher in years to come.

As a side note, I do need to look at the longer-term one year performance of each stock as part of my homework.

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.

Reviewing my Stocks and Shares ISA income options

The second thing I’m doing with my ISA at the moment is checking on my dividend stocks. During a market slump (or even a crash), I might be in the red on my investments. However, the companies I own might still be paying out dividends. In this way, I can still be earning money despite a sell-off in the markets.

One of the benefits of the ISA is that I don’t have to pay dividend tax. This can help me to increase the amount of the income I get to keep from the dividends that I get paid.

Therefore, I want to understand how well my income stocks are holding up at the moment. Not only this, but I also want to tie it in with my first point. After all, the dividend yield will have increased if a business has seen the share price slide. From that perspective, there could be some attractive dividend payers that I can buy. For example the dividend yield of Rio Tinto has jumped almost 2% in the past month. It currently sits at 12.05%.

Overall, my Stocks and Shares ISA is a great source of benefit, even during a market slump. Managing it well during difficult times could help me to increase my potential upside when the stock market rallies.

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Jon Smith has no position in any share mentioned. The Motley Fool UK has recommended Auto Trader, ITV, and Rightmove. 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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