The new Stocks and Shares ISA allowance kicked in at the beginning of this month, 6 April, to be exact. I always try to invest my ISA allowance as soon as possible to make the most of the tax-free quota.
Here are the investments I bought with my £20,000 contribution for my Stocks and Shares ISA.
Income and growth
The first thing I did was top up my favourite blue-chip holding Admiral. I like this organisation because it is pursuing some attractive growth initiatives and has a strong track record of returning cash to investors. The group’s main challenges are the highly competitive nature of the UK car insurance industry and the potential for natural disasters. However, I’m encouraged by the company’s projected dividend yield of 7%, although this is not guaranteed.
I also increased my investment in Reckitt. This consumer goods business has seen its share price slide over the past few months. Investors seem to be concerned that the business’s growth last year will not last into 2021. I’m not bothered about this business’s near-term growth. It is the long-term potential that excites me.
From a long-term perspective, I believe Reckitt’s outlook is bright. To improve growth, management is investing billions in new product development and it is also selling non-core businesses. The main challenges the firm faces are competition and rising costs, which could weigh on profit margins in the long term.
Stocks and Shares ISA buys
As well as the companies outlined, I’ve also been increasing my investment in UK stocks. I think the UK economy could see a mini-boom over the summer, and to that end, I have been buying the FTSE 250.
I believe that buying the index is a better way to gain exposure to companies of all shapes and sizes. The other option is to try and pick individual businesses. While I do pick individual firms in some cases as a way to invest in the UK economy as a whole, I think the FTSE 250 is the perfect instrument for my Stocks and Shares ISA.
Of course, there’s no guarantee the market will experience a mini-boom over the next few months. Another wave of coronavirus could send the country back into lockdown. This may send the FTSE 250 lower. I’m willing to look past these near-term uncertainties and concentrate on the index’s long-term potential.
This is the strategy I have used to invest £20,000 in my own Stocks and Shares ISA. It may not be suitable for all investors. I’m comfortable taking a higher level of risk with my investments. That’s why I have picked companies like Admiral, which may not be suitable for all.
Overall, I believe the combination of single stocks and index funds can provide my portfolio with exposure to some fast-growing business and the recovering UK economy.
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Rupert Hargreaves owns shares in Admiral Group and Reckitt Benckiser. The Motley Fool UK has recommended Admiral Group. 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.