Time marches relentlessly on. In fact, March marches relentlessly on! We are now less than three weeks from the annual contribution deadline for a Stocks and Shares ISA.
So, thinking now about how I would invest my ISA, here is what I would do today if I had a spare £20,000 to invest. Even with a few hundred pounds, though, I would actually take the same steps.
Getting the ISA in place
First things first.
My priority would be to set up the Stocks and Shares ISA then put the money I wanted to invest into it.
The April deadline is for putting the money into the ISA wrapper. So I could put the money in now even if I did not have a plan to invest it just yet.
There are lots of Stocks and Shares ISAs on the market. I would spend some time figuring out what one looks best for my own circumstances.
The right way to invest
Whether buying shares now or later, I would try to invest in what I see as the right way.
For example, I would diversify my portfolio. With £20K, I could easily split my ISA evenly over five to 10 different companies.
But even with £500, I could diversify by buying into three different shares. Another option would be buying shares in diversified investment vehicles, like some investment trusts.
Rather than focussing on cheapness, I would look for value no matter what the share price.
What is the difference?
As Warren Buffett says, price is what you pay and value is what you get. I would be looking to buy into what I see as great companies, with attractive share prices.
Adopting an investing strategy
It may sound overly grand to talk about having an investment strategy for an ISA.
But in fact I see it as a smart, simple move.
Some investors like to load their ISAs with growth shares they think could grow in price over the years. Others are more interested in using the wrapper to generate passive income much sooner, by investing in income shares.
My own ISA is a mixture of growth and income shares.
By setting a strategy appropriate to my own financial means and objectives, hopefully I will be more likely to get what I want from my Stocks and Shares ISA.
An example in practice
Consider as an example one of the companies in my ISA, ITV (LSE: ITV).
I think the broadcaster offers growth opportunities. Advertising demand for traditional television could keep falling, hurting profits. But the firm’s growing digital footprint could help.
On top of that, a large part of ITV’s business is actually providing production facilities and support for other content makers. From filmmakers to influencers, I see substantial growth opportunities for that in coming years although if demand falls, that could hurt ITV’s revenues and earnings.
From an income perspective, too, I like the prospects. This month the business held its annual dividend flat on the back of weaker full-year earnings. I would prefer an increase but, even so, the current yield is 7%.
What about value? The company trades on a price-to-earnings ratio of around 12. That looks like a fair price to me for what I see as a quality business.
