Dividend stocks are stocks you buy because the company they represent pays out a small sum to its shareholders as profit. This can happen once, twice, or even four times a year and the percentages are often much better than what one can get leaving your money in a bank. However, unlike bank interest, dividends are not guaranteed.

Here are two of my top picks from the FTSE 350.

Unilever

Unilever (LSE: ULVR) is a British multinational consumer goods company that owns or partially owns brands such as Ben & Jerries, Graze, and Dollar Shave Club. It currently trades at a fairly high 3,825p but has a very reasonable price-to-earnings ratio of 22. Unilever’s dividend yield currently sits at a mid-range 3.90%. Most importantly in my view, it has paid a dividend every single quarter since 2006.

If I make a quick online search, I can easily find the companies that, right now, are paying the highest dividends on the market. But high yields are often unsustainable and might not last more than a year or so. Of course, there is still no guarantee that Unilever will pay a dividend next year, or a single year after that. But with a long track record of paying shareholders, I feel confident that I can rely on them over the coming years. 

The Unilever share price has been unusually volatile lately, due in large part to the pandemic. My biggest concern, though, is the sheer amount of debt it has taken on since 2018. The company, which has yearly revenues averaging $50bn, now owes over $30bn.

I may wait until the share price comes down a little more, but after that I will be adding shares to my portfolio.

Imperial Brands

The Internet being what it is, I couldn’t help but try to find the ‘best value’ high yield dividend stock. I did this by looking at the current yield, and whether that company has a good ‘moat’ or aspect to its business that protects it from market ups and downs.

Imperial Brands (LSE: IMB) has both of these. This British tobacco company has not made a dividend payment lower then than 10p since May 1999 and currently pays a staggering 8.89% yield.

Tobacco users often have a preferred brand, and sales usually go up in difficult times. That is an excellent moat. It is also why the stock poses ethical concerns for some investors.

Imperial currently trades for 1,553p and has a very enviable price-to-earnings ratio of 5.30, but the value of the shares has been falling fast since 2016. This information gives away the biggest risk with investing in Imperial. The number of tobacco users is falling, and the people who do still smoke, smoke less than previous generations. This is good for our health, but bad for Imperial’s profits.

Personally, I think the dividend is worth the risk, at least in the medium term.

The UK has one of the lowest smoking rates of any country in the world, but Europe continues to have high rates of tobacco consumption. In 2017, 28% of people in France enjoyed some form of tobacco product. That number reaches 40% in Greece.

I fully expect the Imperial share price to continue to fall, so I’m going to wait a couple of months first before adding it to my portfolio.

The post 2 fantastic FTSE dividend stocks I’m watching right now appeared first on The Motley Fool UK.

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James Reynolds does not have a position in any of the shares mentioned. The Motley Fool UK has recommended Imperial Brands and Unilever. 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.

Alphabet

My largest stock holding is Alphabet, the owner of Google and YouTube. At the start of the year, this was my second-largest holding. However, an 18% share price rise in Q1 has pushed it into top place. 

I think Alphabet is well-positioned to benefit from the reopening of the economy. As travel picks up, travel advertising should boost its revenues. Meanwhile, in the long run, the company looks set to benefit from the growth of the online advertising market.

One risk I’m keeping an eye on here however, is regulatory intervention. This could impact the investment case.

Apple

My second-largest holding is Apple. This was my largest at the start of the year. However, the stock experienced some weakness in Q1, pushing it down a notch.

I’m still very bullish on Apple. Looking ahead, I’m excited by its potential in healthcare. CEO Tim Cook is hoping this will be Apple’s largest contribution to mankind.

Looking at the valuation, I actually think Apple shares offer a lot of value right now. The stock’s forward-looking P/E ratio of 26 is very reasonable, to my mind.

Apple does face plenty of competition from rivals such as Samsung. This is a risk to consider. However, I think the long-term investment case remains attractive.

Diageo

My third-largest holding is alcoholic drinks champion Diageo. I see Diageo as a good ‘reopening’ stock to own. Last year, its sales fell due to Covid-19 lockdowns. This year, sales should pick up as the global economy reopens.

Diageo isn’t just a reopening play though. In the long run, there’s plenty of growth potential due to the company’s exposure to emerging markets .

Of course, if there are Covid-19 setbacks, DGE could be impacted. However, I’m a long-term investor here. If the share price was to fall again, I’d most likely buy more shares.

Upwork

My fourth-largest holding is Upwork. It operates the largest freelance employment platform in the world.

This stock is a bit different to my other holdings – it’s much more of a speculative play. The reason it’s one of my top holdings is that it’s done very well for me. I first bought it at $12 last year. Today, it’s at $45. In Q1, the stock rose nearly 30%. 

I think this stock has enormous potential. In my view, it has the scope to be the Amazon of the employment world. That said, it’s very much a higher-risk stock. Profits are small and the share price is volatile.

ASOS

My fifth-largest holding is online fashion retailer ASOS. This is another stock that performed well in Q1. Over the period, it rose about 20%.

Back in December, I said I may take some profits here to make it a smaller holding and reduce my risk because the stock’s quite volatile. I still plan to do this at some stage. However right now, the company is performing well and the share price is trending up. So, I’m not going to trim my position just yet.

The post Here are my top 5 stocks as we start Q2 appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Apple, Alphabet, Upwork, ASOS, Diageo, and Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Amazon, and Apple. The Motley Fool UK has recommended ASOS and Diageo and recommends the following options: short March 2023 $130 calls on Apple, long January 2022 $1920 calls on Amazon, long March 2023 $120 calls on Apple, and short January 2022 $1940 calls on Amazon. 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.

Here’s a look at my five largest stock holdings heading into 2021.

Apple

My largest holding heading into 2021 is Apple. I like Apple for several reasons. Firstly, it makes amazing products. I can’t see myself not owning an iPhone any time soon!

Secondly, I really like the ecosystem it has built up over the last decade with the iCloud. This enhances customer ‘stickiness’, giving the company a competitive advantage.

At its current valuation, Apple is probably fully-valued. However, with the company moving into new areas such as healthcare, the long-term growth potential remains significant, in my view.

Alphabet

Close behind Apple is Alphabet (NASDAQ: GOOG). This is a stock I’ve been slowly building a position in in recent years and it’s performed well for me. My last purchase was during the stock market crash in March at $1,070. Currently, it’s trading near $1,700.

There are a number of reasons I like Alphabet. Firstly, I see Google as the ‘heart’ of the internet. If you own a business these days, you pretty much have to advertise on Google to stay competitive.

Secondly, I’m also really excited about YouTube’s growth potential. In the last 15 years, this has evolved from a platform where people posted funny videos to becoming one of the most dominant forms of entertainment globally.

Alphabet currently trades on a P/E ratio of under 30. I think that’s reasonable for this tech champion. I see it as a great stock to own for the long term.

Diageo

In third place is alcoholic beverage legend Diageo. This is a stock I was buying throughout the year while its share price was depressed. Its recent price rise has boosted the value of my holding.

The reason I like DGE is that it’s a ‘sleep-well-at-night’ stock. Alcohol is relatively recession-proof. And the company is a reliable dividend payer. Diageo also has strong long-term growth prospects. In the next 10 years, 750m extra consumers will be able to afford its brands (Johnnie Walker, Smirnoff, etc).

ASOS

My fourth largest holding going into 2021 is ASOS. This is a stock that’s done very well for me. I was buying in March at 1,120p. Today, the share price is 4,500p.

At some stage in the future, I plan to take some profits here and make it a smaller holding. I’d prefer to have Microsoft, or perhaps Amazon in my top five holdings. However, I’m not ready to sell any shares yet. With the company benefiting massively from the e-commerce boom, I think the share price can go higher in the short term.

Reckitt Benckiser

Finally, my fifth largest holding going into 2021 is consumer goods champion Reckitt Benckiser. I see this as a great to stock to own in the current environment.

Firstly, it’s benefitting from the increased focus on hygiene. Secondly, like Diageo, it’s relatively recession-proof. It’s also a reliable dividend payer.

This stock isn’t going to set the world on fire. But, in the current environment, I think it can play an important ‘defensive’ role in my portfolio.

The post Here are my top 5 stocks heading into 2021 appeared first on The Motley Fool UK.

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• What’s going on with the AstraZeneca share price now?
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Edward Sheldon owns shares in Apple, Alphabet, Diageo, ASOS, Reckitt Benckiser, Microsoft, and Amazon. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Alphabet (C shares), Amazon, Apple, and Microsoft. The Motley Fool UK has recommended ASOS and Diageo and recommends the following options: long January 2022 $1920 calls on Amazon and short January 2022 $1940 calls on Amazon. 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.

Cheap ISA buy?

The fact that shops are being allowed to reopen does not mean that consumers will be in the mood to spend like there’s no tomorrow, of course. They may, however, feel the need to replace some of their more comfortable ‘lockdown clothing’.

For me, this could be good news for Primark-owner Associated British Foods (LSE: ABF). Say what you like about the wares sold by this company — the fact that you can fill a wardrobe on the cheap could mean it does better than most during a recession.

Another attraction to ABF is that it isn’t solely dependent on the success of its stores — it has its fingers in the grocery, agriculture, sugar, and ingredients markets. This makes it a good ISA option for defensive-minded investors, in my opinion.

True, the shares haven’t done particularly well over the last few years, but consumers’ desire to find value for money in tough times could mark a change in direction. 

If we assume that analyst predictions on earnings in FY21 are still roughly correct, the stock also changes hands at a really-rather-decent valuation of 14 times earnings. 

Quality operator

My second pick of retailers would be FTSE 100 sports and casualwear firm JD Sports (LSE: JD). 

Boasting excellent free cash flow and experienced management, this business looks set to go from strength to strength. Having established itself as a go-to destination for trainer lovers in the UK, it’s now targeting large overseas markets such as the US.

Is a lot of this already priced-in to the shares? Quite probably. Like many stocks, the optimum time to buy was a couple of months ago. From mid-February to mid-March, JD lost two-thirds of its value. The share price has more than doubled since.  

Hindsight is a wonderful thing, of course. Nevertheless, JD is one of only a handful of FTSE 100 stocks I’d feel comfortable holding within an ISA for the very long term. And companies like this rarely stay cheap for long.  

Riding high

My third and final selection is something of a wildcard: bicycle-seller and auto parts retailer Halfords (LSE: HFD).

I’ve actually been very bearish on this company in the past, partly due to its lack of an economic moat. But the coronavirus pandemic has altered my stance somewhat. In case you haven’t noticed, cycling has been hugely popular over recent months as long-distance travel has been prohibited. 

To be clear, I don’t think Halfords is a ‘buy-and-forget’ stock. There’s no guarantee that those who say they now plan to ride to work rather than catch public transport will actually do so. There’s also quite a bit of debt on the balance sheet.

Even so, the next set of numbers released by the company is likely to be very good indeed. Those buying a small amount now for their tax-efficient ISA could still do well. 

The post Have £3,000? Here are 3 stocks I’d buy for my ISA as lockdown lifts appeared first on The Motley Fool UK.

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Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods. 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.

Last month, however, I decided to stop doing so for three reasons.

Low rates    

First, a bit of context. In the last month, I switched to another fixed deal at a lower rate that I was previously paying. Much my father’s indignation (he grappled with double-digit percentages back in the 1990s), my new rate is a little under 2%. 

The fact that I’m now paying less than half the rate of interest I was before means there’s a bit of cash leftover. “So why not carry on making overpayments“, you might be wondering?

One reason relates to the product itself. Unsurprisingly, there are limits to how much a lender will let you pay off within a certain time frame. Go over this limit and you’ll be penalised. With repayments now less than they would have been had I not tackled the mortgage head-on in the past, this was a potential issue for me. It may be a risk for you too.

A second reason relates to the benefits that come from moving this extra cash into my Self-Invested Personal Pension (SIPP).

As I’ve mentioned before, SIPPs are a very attractive option for most long-term investors. In addition to letting you shield any investment profits from the taxman, having a SIPP means you’ll also receive tax relief from the government on any money you pay in. 

In practice, this means that someone with, say, £100 left in surplus cash every month will get an additional 25% on that amount if they put it in their SIPP, assuming they pay the basic rate tax. So, they’d have £125 rather than £100 to put to work.

My third reason follows on from the second. Right now, the yield generated by a simple exchange-traded fund that tracks the FTSE 100 is higher than the interest being charged on my mortgage debt (although, clearly, rates might rise in the future). As such, I stand a chance of generating more wealth over the long term by investing the spare cash, reinvesting the income I receive in my SIPP and allowing compounding to work its magic. 

A word of caution

Whether someone should switch from overpaying their mortgage to putting any surplus cash to work in the market will clearly depend on their circumstances. The latter option is far riskier.

Shares might plunge tomorrow and, in doing so, reduce the value of any money not used for the mortgage. Contrast this with the comfort felt from knowing you’re tackling your biggest debt faster than originally intended, thus potentially saving you thousands of pounds in the process.

There are ways of mitigating this risk. Buying liquid, diversified funds (such as that mentioned) rather than individual company stocks should temper some of the volatility. A commitment to investing for decades rather than a few months or years should also make it easier to deal with things on an emotional level.

Ultimately, both overpaying and investing are good ideas but the best option for someone will always be that which allows them to sleep at night. 

The post 3 reasons to not overpay a mortgage appeared first on The Motley Fool UK.

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• What’s going on with the AstraZeneca share price now?
• This S&P 500 stock is down 30% and the CEO just bought $10m worth of shares

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Off to a good start

I’m not a massive fan of active funds generally due to the high fees they charge. That said, one I have bought into is the Smithson Investment Trust, overseen (but not managed) by the highly-regarded Terry Smith of Fundsmith. 

The fund only holds between 25 and 40 ‘quality’ stocks at any one time, making it highly concentrated. The majority of these are UK or US-listed and all have a market cap of between £500m and £15bn.

It’s still early days for the fund, but Smithson’s share price was up 30% since the beginning of the year by the end of November, compared to the 21% achieved by its benchmark (MSCI World SMID Index). Not bad at all.

Invest like Buffett

Another concentrated active fund that’s put in a great performance since inception has been the CFP SDL UK Buffettology Fund. By last month, it had climbed 235% in value since 2011. 

Like Smithson, the fees are high, but can probably be justified assuming (and this is a big assumption) that manager Keith Ashworth-Lord’s strategy of buying the sort of stocks Warren Buffett might be interested in — high quality but reasonably priced — continues working.

Going cheap

Value stocks — those trading at less than their intrinsic value — have lagged super-charged growth stocks for so long that many investors simply aren’t interested in them. I think that’s a good reason to get involved, especially as studies have found that what’s ‘cheap’ generally gives better returns over the very long term.

The Vanguard Global Value Factor exchange-traded fund, which has holdings in over 1,200 stocks, is a way of tapping into this trend. It’s an active fund in the sense that it adopts a rules-based approach to picking stocks, but the ongoing charge is low at just 0.22%.

If you’re comfortable zigging while others zag, this could be worth looking into.

All that glitters

I’ve been suggesting that it might be a good idea to put some money in gold for a while. From the beginning of 2019 to early September, this call has worked out well as the shiny stuff rose 26% in value. Things have settled down since but, with global growth slowing, I still think it’s worth holding. 

The iShares Physical Gold ETC is a cheap way of getting exposure to the spot price. The ongoing charge is 0.25%. There’s no income, of course, but that brings me to my final pick. 

Dividend delight

Another passive product I think might be worth owning is the iShares FTSE UK Dividend fund. The value of this fund, which holds 50 high-yielding UK stocks, may not gallop higher, but it’s worth remembering that dividends have been shown to generate a sizeable proportion of investment returns over time. 

Based on its current factsheet, the fund yields 6.7%. That’s a whole lot more income than you’d generate from even the top instant access Cash ISA at the moment (1.35%). It’s also arguably a lot safer than buying its individual constituents, some of whom are at risk of needing to cut their cash payouts. 

The post Have £5k to invest? Here are 5 funds I’d buy for an ISA starter portfolio appeared first on The Motley Fool UK.

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Paul Summers owns shares of Smithson Investment Trust and Vanguard Global Value Factor UCITS ETF. The Motley Fool UK has no position in any of the shares mentioned. 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.

Forex trading

Social media often portrays forex trading as a glamorous hobby. For example, ads on Facebook and Instagram regularly show forex traders living in expensive apartments, driving fast cars, and showing off their luxury watch collections. These ads will lead you to believe that you can achieve this lifestyle by trading forex just a few hours per day.

However, in reality, most forex traders are not living this kind of lifestyle. In fact, according to some sources, up to 95% of people that try their hand at trading forex lose money.

Disclaimers made by some of the UK’s top forex trading platforms certainly suggest that forex trading is challenging. For example, forex.com says that 70% of its clients lose money, while FXTM says that 83% of its clients lose money trading forex.

So, while there are some people that do manage to generate a second income from forex, it’s clear that most people don’t get rich from it. If you’re looking to grow your wealth, it may not be the best option.

Stock investing

Investing in stocks is very different to forex trading because, over the long term, stock markets tend to rise. This means that if you put together a diversified portfolio of stocks and invest for a number of years, there’s a good chance you’ll increase your wealth. Unlike forex, the odds are in your favour.

Just look at the long-term performance of the stock market. According to Investopedia, between 1926 and 2018 the S&P 500 index delivered an annual return of 10%. Meanwhile, according to the most recent Barclays Equity Gilt study, UK equities have delivered an annual return of around 5% above inflation since 1899. These figures may not sound so exciting at first, but if you were to invest £10,000 a year and you generated a 9% return on your money every year, your portfolio would be worth one million pounds in around 26 years.

There are ways to generate much higher returns from the stock market too. For example, small-cap investing, which focuses on smaller companies, is one strategy that can deliver fantastic returns over time. Had you invested £5,000 in Fevertree Drinks when it floated in late 2014, that money would now be worth nearly £90,000. Similarly, an investment of £5,000 in online fashion retailer Boohoo five years ago when it was an under-the-radar smaller company would now be worth nearly £30,000.

Of course, not every stock performs like this, but the message is clear – the stock market can help you boost your wealth. When it comes to forex trading versus stock investing, the choice is a no-brainer, in my view.

The post Forex vs stocks: what’s the easiest way to get rich? appeared first on The Motley Fool UK.

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Edward Sheldon owns shares in Boohoo Group. The Motley Fool UK has recommended boohoo 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.

This is the trend for (institutional) investors to reduce their activity from the beginning of next month on the belief that performance over the following six will be less stellar than from October – April. 

Research conducted by author Stephen Eckett backs this up. He found that the market tends to trade fairly flat in the first two weeks of May before drifting lower in the second half of the month.

Eckett’s research also shows that, while the market doesn’t necessarily always generate negative returns over the summer months, falls can be fairly heavily when they do occur.

In light of this, it’s only natural for private investors to consider doing the same as those in the City. No one likes to see the value of their holdings dip, albeit temporarily. Here, however, are three reasons why I’ll be sitting tight.

1. No one knows what will happen next

The problem with basing any decisions on patterns in investing is the assumption that they’re reliable. Truth is, they work until they don’t.

What’s that? You’ll jump back in before activity in the market returns? But who’s to say stocks will definitely rise in October? Aren’t we due to leave the EU then?

Star fund manager Terry Smith (of Fundsmith) is a critic of those who attempt to time the market. Either these people fail, or they don’t yet know that they’ll fail, according to Smith. I very much agree.

Deciding whether to part with a particular stock should be based on what the company is doing, not other investors.

2. Loss of dividends

Unless you believe that all spare cash should be used to enable a company to grow, receiving dividends is one of life’s small pleasures. The challenge comes in not spending the cash sent your way, unless you’re using the income generated to help fund your retirement, of course.

For all long-term investors, the rule is simple. Re-invest what you receive back into the market and turbocharge your wealth over time.  

Don’t take my word for it. The Barclays Equity Gilt study showed that £100 invested in the UK stock market in 1899 would have been valued at 35,000 at the end of 2017, assuming all dividends had been reinvested. Had they not, it would be worth just £203.

Returns like this are far less likely to happen if you’re consistently ditching stocks that return cash over the summer months. 

3. Where else can you put your money?

Even if you were to liquidate your holdings at the beginning of next month (which, depending on the size of your portfolio, might mean not-insignificant transaction costs), you’re faced with the problem of where to put your money.

If it stays idle in your ISA or SIPP, it’s not earning you anything apart from a very, very low rate of interest. 

The best cash savings account pays 1.5% but that’s lower than inflation, meaning that your money will still be losing value. That’s a lot of hassle for pretty much no reward.

In sum, I intend to ride out any volatility over the next few months, remembering investment is a long-term game. Should you do the same, your future self will surely be grateful. 

The post 3 reasons NOT to sell any stocks in May appeared first on The Motley Fool UK.

More reading

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• £10,000 invested in red-hot Tesco shares just 1 week ago is now worth…
• See the income from investing a £20k ISA in this UK stock before it goes ex-dividend on 9 April
• What’s going on with the AstraZeneca share price now?
• This S&P 500 stock is down 30% and the CEO just bought $10m worth of shares

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

Yet perhaps the biggest misconception of all when it comes to investing in stocks is that you have to be wealthy to invest. That simply isn’t true. These days, literally anyone can invest their money in stocks and take advantage of the power of the stock market to boost their wealth over time.

Huge misconception

I was actually discussing this very topic with a local builder just a few weeks ago. When he asked what I did for a living, I explained that I write about investing in stocks and funds and building wealth through the stock market. He was clearly interested because he told me he had a decent sum of money sitting in a Cash ISA earning 1% interest. His response though? “Sounds interesting, but you have to be wealthy to invest, right?”

I was actually quite stunned at this response. Here was a guy who was switched on and had built up some solid savings, yet had no idea that investing in the stock market to grow his wealth was even a possibility. His impression was that investing was only for rich people. At this stage of the conversation, I sat him down and explained that this investing belief couldn’t be further from the truth.

Investing has changed

You see, investing has changed a lot over the last 20 years. Once upon a time, before the internet, stock market investing was probably aimed more at the wealthy. Yet due to advances in technology, the cost of investing has come right down in recent years and it’s now also possible to start building an investment portfolio with just a small amount of money.

For example, with Hargreaves Lansdown – the UK’s largest online broker – you can now start up a portfolio with a lump sum of just £100. You can also set up a monthly investment plan with just £25 per month, which equates to just £5.77 per week. Forget needing to be wealthy to invest – you can invest for the cost of a sandwich and a coffee per week. £25 per month is less than most people pay for their mobile phone plans.

Growing your money

It’s amazing what you could you do with that money and how quickly it could grow. For example, you could invest in Fundsmith Equity fund which deals in high-quality companies all across the world. This particular fund is up 165% in the last five years, although past performance is no guarantee of future performance. Alternatively, once you built up a healthy balance you could pick up some dividend stocks yielding 5% and start building up a passive income. Ultimately, there are many different ways to build up your wealth through the stock market.

The key takeaway here though, is that these days, literally anyone can invest in stocks. If you think investing is only for the wealthy, you’re way off the mark.

The post Do you have to be wealthy to invest your money? appeared first on The Motley Fool UK.

More reading

• Is now a good time to start investing in the wealth-building stock market?
• £10,000 invested in red-hot Tesco shares just 1 week ago is now worth…
• See the income from investing a £20k ISA in this UK stock before it goes ex-dividend on 9 April
• What’s going on with the AstraZeneca share price now?
• This S&P 500 stock is down 30% and the CEO just bought $10m worth of shares

Edward Sheldon has a position in the Fundsmith Equity fund. 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.

Make the most out of your allowance

The government sets a limit on the amount that you can invest in ISAs each year, and for the current tax year, there’s a maximum subscription allowance of £20,000. You can divide this in any way across a simple cash ISA or one through which you by shares, as well as the Lifetime ISA (maximum of £4,000) and an Innovative Finance ISA, provided you stay within the combined annual limit. You cannot carry forward any of the allowance to future years, so any unused allowance in a tax year will be lost forever.

Investing with a lump sum at the start of the tax year enables you to be fully invested as early as possible, which gives you the greatest potential for growth. But by regularly investing, you have the opportunity to spread your risk. The effect of regular investing is that you will be buying assets at different prices on a regular basis, say monthly, rather than just once. This enables you to smooth out volatile price movements — and with automatic regular investments, it can also make it easier for you to stick to your investment plan.

Choosing the right ISA provider

Choosing an ISA provider can be more complicated than it sounds. The right provider can open up a wider range of investment opportunities, whereas others may restrict your options.

And what may be the right choice for someone else may not be best for your investment needs. You should consider what you actually want to trade, how much financial advice you require and whether or not you are happy to place trades online.

It’s also important not to overlook the costs of trading. Account fees and dealing commissions can add up much more quickly than you think, and it can have a big impact on returns through the effects of compounding. Keeping this in mind, it’s also a good idea to keep your portfolio turnover as low as possible.

Picking the right investments

With a wide range of investment options available for a stocks and shares ISA, deciding what to buy can be daunting for both new and experienced investors.

You could invest directly in stocks. Or you can buy an actively managed fund, which can give you instant diversification from a single investment. You also get a professional fund manager, who makes all the key investment decisions on behalf of investors, meaning you won’t need to worry about spending time researching companies yourself. Individual investors tend to go for unit trusts or open-ended investment companies (OEICs), but investment trusts are also worth considering.

Another option would be to invest in exchange-traded funds (ETFs) that track popular stock indices, such as the FTSE 100 or the S&P 500. Investing in ETFs can be a very low cost way to access the performance of an index, with some offering ongoing charges of as low as 0.07%.

The post 3 tips to get the most out of your stocks and shares ISA appeared first on The Motley Fool UK.

More reading

• Is now a good time to start investing in the wealth-building stock market?
• £10,000 invested in red-hot Tesco shares just 1 week ago is now worth…
• See the income from investing a £20k ISA in this UK stock before it goes ex-dividend on 9 April
• What’s going on with the AstraZeneca share price now?
• This S&P 500 stock is down 30% and the CEO just bought $10m worth of shares

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.