I can think of a few simple habits that can boost the performance of my Stocks and Shares ISA over time. To illustrate this, I’m going to use my biggest single company holding — Greggs (LSE: GRG) — as an example.
Buy the dips
So long as I stick to buying established, financially robust companies, taking advantage of periods of market panic is one of the best ways of improving the performance of my ISA.
As it happens, this is exactly what I did with Greggs during the pandemic. Back in 2020, the mid-cap was forced to shut its stores and the share price inevitably crashed.
As distressing as this was for holders, I made a point of checking the company’s balance sheet. With limited net debt (and barring a complete meltdown of society), I concluded that it would cope with this disruption and began buying in small tranches.
Thankfully, my analysis paid off. The share price set a new record high at the end of 2021.
To be clear, buying when most won’t has the potential to turbocharge returns.
Reinvest dividends
A second thing I do is to chuck any income I receive back into the market.
This is easier said than done during a cost-of-living crisis when there are bills to be paid. But reinvesting dividends means I benefit more from the magic that is compound interest.
Right now, Greggs yields 2.3%. That’s pretty average as UK stocks go. However, using it to buy more shares will likely make a sizeable difference to the value of my portfolio in a decade or two, assuming the FTSE 250 member is still around (and I suspect it will be).
The only caveat here is that any income I receive from any company is never guaranteed. For evidence of this, it’s worth noting that the baker temporarily ceased paying dividends as the aforementioned pandemic took hold.
Safety in numbers
The idea of spreading my money around the market seems to go against the idea of building as big a pot of cash as possible. Why not just buy the stocks that I think will outperform?
Well, the fact is no one knows the future. There’s no guarantee Greggs will deliver going forward or even do as well as other stocks. Like most investors, my portfolio wouldn’t be doing so well if I didn’t have some exposure to the US tech titans like Microsoft, Nvidia and Meta Platforms via several funds, for example.
Controversial as it may sound, a decent dollop of diversification — and a realistic view of one’s stock-picking prowess — may actually lead to a better outcome.
Don’t just do something, stand there
A final habit is being patient.
Sitting on one’s hands is challenging in our 24/7 media-driven world. What’s rarely mentioned, however, is that staying invested in high-quality companies for as long as possible can lead to a great result.
Greggs is a perfect example. Despite multiple headwinds, including those mentioned above, its share price has climbed from around £5 to almost £27 in 10 years.
Ironically, the biggest boost I can give my ISA is to interrupt the wealth-building process as little as possible.
