Maybe I’m too much of a nerd, but it does get me excited when I see a stock I’ve bought appreciate in value. Seeing the share price jump in the short-term can sometimes leave me staring at the screen far too much in the day.
Yet there’s another way that I can invest that isn’t as exhilarating, but ultimately stands to make me a considerable amount of money via my Stocks and Shares ISA.
Details of the idea
I’m referring to the strategy of drip-feeding money into the stock market over time. Some people do this without realising it, for example via a pension contribution. Yet by actively taking this into my own hands with my Stocks and Shares ISA, I can have full control of not only how much I invest, but what I invest in.
Given that I get paid monthly, it makes sense for me to allocate some funds on this basis. In terms of the specific type of stocks I select, I’m not going to get too bogged down. Growth stocks, value plays, dividend gems and other types of shares can all be included in my ISA.
The reason why I’m not focusing on one particular area is because my focus for this strategy is on time instead. My priority is to ensure that each month I invest a specific amount of money in the market. I want to do this for years and years to come.
Over time, I expect dividend stocks to keep paying me income. I’d expect value shares to move higher, and growth stocks to rally. By focusing on time, I’d expect performance on all fronts.
Why it’s boring
The time factor is why some would call this a boring strategy! It’s true, I won’t get rich overnight using this idea. But it should give me a higher probability chance of becoming richer in the end.
On a historical basis, the long-term trend of the stock market has been higher. Yet when I zoom in on just a stretch of a few months, it’s much harder to say if the market will rise or fall. That’s why I make the statement that if I’m investing and holding (and adding!) to my portfolio over a long time, the chances of me coming out on top are higher.
The other element of why it can be boring is actually something I take as a positive. This strategy is quite passive in nature. Sure, I need to invest each month. I also need to keep an eye on how my portfolio is performing. Yet when I compare this effort against people that trade everyday, it’s a lot more passive. This allows me to spend time doing other pursuits.
Potential gains with the ISA
The reason I’ll use this idea in conjunction with my ISA is because of the tax benefits. Within my ISA, I don’t pay capital gains or dividend tax. This allows me to compound my income and profits, without having to take any out for the taxman.
To illustrate how I could get richer, I’m going to assume I can invest £450 a month, with an average annual return of 6%. After 20 years, my investment pot would be worth just over £200,000.
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.
