This Stocks and Shares ISA plan could reduce my investing stress

Does trying to decide what shares to buy in a Stocks and Shares ISA give you headaches? Maybe there’s a low-pressure approach.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Putting away regular cash into a Stocks and Shares ISA can be a great way to build up long-term wealth. But do you ever realise you’ve saved enough for a share purchase, but can’t decide what you want to buy?

It happens to me a lot. And the fact that I usually only hold a relatively small number of stocks makes it a tougher decision.

Do I really want to invest in, say, my ninth favourite stock when I already hold eight, just because I want to do something with the cash?

Should you invest £1,000 in Phoenix Group Holdings Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Phoenix Group Holdings Plc made the list?

See the 6 stocks

Diversification

I could top up one of my favourite stocks. But I only really like a few sectors, and that could risk harming my diversification.

Do I want to get too heavily into banks? With the troubles hitting the financial sector in the past decade and more, no thanks.

A friend tells me he does something simple. He puts spare ISA cash into an index tracker fund when he can’t decide. And that way he keeps his ISA fully invested.

If he later finds a stock he really wants, he can sell some tracker fund shares to pay for it. He reckons he should gain enough on average to cover the extra trade cost.

Will it work?

Rather than an index tracker, I think I’d use a diversified investment trust that sets income as one of its targets. Maybe more City of London Investment Trust (LSE: CTY).

Created with Highcharts 11.4.3City Of London Investment Trust Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

It’s currently on a forward dividend yield of 4.76%. And, depending on how long I stayed with it, that could easily pay enough to cover a new transaction cost when I finally decide on something I like better.

So, put each chunk of cash into an investment trust, and then only sell and transfer it when I find something I really really want. That could work.

And I think I see another benefit.

Bigger benefit

City of London is already one of my favourite investments. That’s mainly because it’s lifted its dividends for 38 years in a row. But it gives me very good diversification just from one single investment too.

So even if I don’t find anything else I’d prefer to own, I reckon my cash should be fairly safe just building up in this trust.

It would be spread across Shell, BAE Systems, AstraZeneca, Tesco… and a whole load more UK companies.

Keep it there

An investment trust could still go bad, mind. I’m still having to trust one single management team with all the underlying investments. And the City of London share price hasn’t done much in the last 10 years. Also, if we don’t get that dividend rise one year, I could see the price tumble.

So, maybe find two or three more diversified investment trusts with strong dividend track records.

Murray Income Trust (with a 4.7% dividend and 51 years of rises) and Merchants Trust (5.0%, 42 years) seem like clear candidates.

Then put my ‘waiting’ cash in them, with half a plan to just leave it there? It could take the stress of making decisions off me.

Should you invest £1,000 in Phoenix Group Holdings Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Phoenix Group Holdings Plc made the list?

See the 6 stocks

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Alan Oscroft has positions in City Of London Investment Trust Plc. The Motley Fool UK has recommended AstraZeneca Plc, BAE Systems, and Tesco Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

artificial intelligence investing algorithms
Investing Articles

Up 272% in just a year, is Palantir stock just getting started?

This writer recognises that Palantir has grown its business very well -- but does the stock price offer him an…

Read more »

Runner standing at the starting point with 2025 year for starting in new year 2025 to achieve business planing and success concept.
Investing Articles

Up 50%? The Aston Martin share price forecast is mind-blowing! 

If analysts are right, the Aston Aston Martin share price could absolutely rocket in the year ahead. Harvey Jones says…

Read more »

Investing Articles

As the S&P 500 drops, here are 2 Stocks and Shares ISA holdings I’m watching

Our writer has different views on how President Trump's tariffs might affect these two US holdings in his Stocks and…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

£10,000 invested in Tesla stock at Christmas is now worth…

Tesla stock has been one of best-performing investments of the past decade. But things haven't gone to plan for investors…

Read more »

Investing Articles

Up 279% in 5 years, could Meta stock keep soaring?

Meta stock has more than tripled in five years. This writer sees lots to like about the business but also…

Read more »

Pink 3D image of the numbers '2025' growing in size
Investing Articles

25% total return in a year? Is now the perfect time to buy BP shares?

BP shares are on the front line of today's global economic and political uncertainty but analysts think they can still…

Read more »

Affectionate Asian senior mother and daughter using smartphone together at home, smiling joyfully
Investing Articles

With Cash ISA changes coming, could now be the time to consider buying shares?

Changes to the Cash ISA could lead to greater investment in the stock market. This could be a good thing…

Read more »

Investing Articles

These FTSE 100 dividend shares just got cheaper, thanks to President Trump!

Investors buying dividend shares can lock in bigger long-term yields when share prices take a tumble. These two just did…

Read more »