As much as I hate to admit it, I haven’t made the most of my Stocks and Shares ISA this year. But I’ve still got a few months to do so. So, all is not lost.
S&S ISAs are a great way to maximise returns. Every UK investor is entitled to a £20,000 allowance each year. When an investor decides to withdraw their money, not a penny is paid in tax.
I want to take advantage of mine in the time I have left before the 5 April deadline. But that reminds me of a few key pieces of advice I must consider.
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.
Diversification
When opening a new Stocks and Shares ISA, a lot of people tend to rush and buy the ‘hot stocks’. Granted, I’ve been investing in mine for a few years now. But I’m still making sure I’m not lured into this trap.
Instead, I’m copying the professional investors. By that, I mean I’m making sure I diversify. Diversification is a key method to offset risk. Many pros hold at least 20 stocks in their portfolio. Ideally, it would be more.
Within those 20+ stocks, they make sure to buy across a host of sectors. While I see value in banking stocks at the moment, I’m aware that the sector has a tough year ahead of it. I don’t want to invest all my money into banks only for my money to dwindle.
Be patient
That said, I’m not all too concerned about short-term blips. That’s because I plan to build up the value of my Stocks and Shares ISA over the years and decades to come.
We’ve been through a volatile few years. Yet the stock market has proven time and time again the best way to see rewards from it is to think long term.
In the times ahead, I plan to consistently invest a set amount into my ISA at the end of every month. Hypothetically, if I invest £250 a month and see an average return of 8% a year, I could reach millionaire status in 42 years. If I could increase that monthly payment to £500, there’s a chance I could reach it in 34 years. That would no doubt make my retirement a lot more comfortable.
Value to be had
With that in mind, I think now is the ideal time to start pumping money into my ISA. I could wait until the April deadline, as many do. But that’s a couple of months that my money isn’t working for me. While a few months may seem insignificant, over the long run it most certainly isn’t. What’s more, I think there’s plenty of bargains on the FTSE 100 and FTSE 250 right now that I plan to capitalise on.
In the weeks ahead, I plan to snap up undervalued shares. I have my eye on a few, including Scottish Mortgage Investment Trust, Unilever, and ITV. Should the market waver this year, I won’t stress. I’m biding my time to build up my wealth.
