Each year, I get an allowance of £20,000 that I can use in my Stocks and Shares ISA. Don’t get me wrong, this is still my money I have to earn! But what it means is that I can get the full tax benefits of buying and selling stocks on this £20,000 within the ISA.
I don’t usually manage to max out my ISA each year, with still a large chunk of my 2022/23 allocation still unused. If I suddenly received a lump of cash before next April, here are the stocks I’d buy.
Growth ideas for my Stocks and Shares ISA
One of the main benefits of my ISA is that capital gains tax doesn’t apply. So when I sell a stock for a profit, I get to keep the full amount. As a result, this can come in very handy when buying growth stocks that I feel could yield high rewards further down the line.
I’ve flagged up over the past month that growth stocks have performed really badly in 2022. People simply didn’t want to take the risk on this area, preferring to stick to cash or buy more defensive stocks. I think that this tide will turn in early 2023.
Primarily, I feel we have reached peak pessimism regarding the outlook for the economy, as well as interest rates and inflation. If I’m correct, then it makes sense to load up on growth stocks in the coming months.
Stocks on my wishlist
On my wishlist I have a range of names for this category. From the UK I’m a fan of Wise. The FinTech company used to be known as TransferWise, focusing on just foreign exchange. Now it has developed into a much broader offering, with mass payment potential for business users and integrated plug-ins for e-commerce users. The growth here in coming years could be large.
Outside of the UK, I think some big US tech companies are trading at cheap levels. The traditional FAANG (Facebook — now Meta — plus Apple, Amazon, Netflix, and Google — now Alphabet) group have all struggled. Some of the stocks have halved in value. Given that this group dominate the Nasdaq 100, I could just buy an index tracker. Alternatively, I can buy them individually.
Investment trusts for long-term gains
The market volatility this year isn’t something I think will go away in 2023. Therefore, I also want to add some investment trusts to my ISA wishlist. When I have the free cash, I want to buy these funds that are managed by professionals.
My aim is to let the money managers navigate the markets for me. It takes some of the pressure off me knowing that the analysts are on top of the stocks held in the trust.
To this end, I like the City of London Investment Trust as it specialises on UK-listed stocks. I’m also adding the European Opportunities Trust that could outperform if we get peace in Ukraine in 2023.
With all of these stocks on my wishlist, a risk is that I don’t generate enough free cash to buy them all within the next few months. Yet even if I can only afford to buy some, I feel each has the potential to generate strong returns.
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.
