If I were starting investing today, the first thing I’d do is open a Stocks and Shares ISA. It is, visually at least, no different from a regular investment account. But it allows me to earn tax-free money from my investments.
Every year, UK residents are able to put up to £20,000 into their Stocks and Shares ISA. And the deadline to do this is 5 April — the end of the tax year. Moving forward, however, the government plans to introduce an extra £5,000 tax-free allowance to invest in “UK-focused assets”. This will supplement the existing £20,000 limit.
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.
Opening an ISA
Opening a Stocks and Shares ISA is a straightforward process offered by all major brokerages and many smaller ones. As noted, investors can benefit from tax-free savings on their investments, making it an attractive option for long-term wealth accumulation.
These ISAs provide us with a wide range of investment options, including stocks, bonds, and funds from around the world. In turn this allows investors to tailor their portfolios according to their risk preferences and financial goals. With the advent of fractional shares and low-fee platforms, it’s also possible to start an investment journey with very little money at all.
However, what if I had £10,000 I wanted to invest? Well, it makes sense to get it in the ISA wrapper before the end of the tax year. That way I won’t eat into my allowance for next year. So, where would I invest?
Making informed choices
All investment decisions should be informed ones. When I started investing around a decade go, some of my choices were built around sentiment rather than being data-driven. For example, I bought shares in Crest Nicholson after buying a flat from the developer.
Yet one company I’ve recently bought and may consider buying more of is Nordic American Tankers (NYSE:NAT). The firm recently missed the very high expectations set for it by analysts, but that hasn’t put me off.
That’s because I believe we’re at the beginning of a supercycle — a sustained period of expansion, usually driven by robust growth in demand for products and services — in the tanker and sea-freight industry.
During the pandemic, companies made very few orders for new vessels. And these vessels can take up to five years to build. So we know supply is weak, but this has been exacerbated by a drought affecting the Panama Canal and Houthi attacks on boats transiting the Bab el Mandeb.
These events mean that vessels are having to travel further or sit in queues on the way to their destinations. In turn, there’s less available supply of tankers on the market, and day-rates — to lease the vessels — are surging.
While I really like this stock, I appreciate that it’s ageing fleet means it’s not able to operate on prime contracts — those that pay more. Nordic’s 20 Suezmax tankers have an average age of 12.6.
But with an 11.8% dividend yield and a forward price-to-earnings ratio of 7.2 times, I think it’s a really attractive investment opportunity. Moreover, the tightness in the tanker market is only expected to get worse.
