Like many people in the UK, I have savings in a Stocks and Shares ISA. From a wealth management perspective, it’s a no-brainer really – with this type of account I can invest in shares and funds and not pay any tax on gains or income.
Recently, I’ve been thinking about how I can maximise the value of this ISA over the next five years, looking beyond making regular contributions. Here’s what I came up with.
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.
Avoiding big losses is crucial
If I want to maximise the value of my ISA, the first thing I need to do is avoid big losses. These can be very costly when it comes to generating strong long-term returns.
Just look at the maths. If the value of my portfolio was to fall by 50%, I’d need to generate a return of 100% just to break even.
Rule No. One : Never lose money. Rule No. Two : Never forget Rule No. One.
Warren Buffett
In terms of strategies here, one that could help me is diversification. By spreading money over different stocks, I should be able to lower my overall portfolio risk significantly.
Another is position sizing. By keeping higher-risk positions smaller, I should be able to give myself a better chance of success.
Generating outsized gains is key
Next, I need to strive to generate strong, market-beating returns. I think the best way to do this is with growth stocks.
With these, all you need is one or two big winners and your returns can be enormous. Just look at Nvidia – over the last five years it has turned a $3,000 investment into more than $30,000.
Note here that to really capitalise, an investor would have had to let the stock run and run. That’s hard to do.
I tend to take some profits along the way when my growth stocks are rising. This lowers my risk but it also stops me from making huge returns.
Could this growth stock be a big winner?
Now, one stock in which I see a lot of potential is Axon Enterprise (NASDAQ: AXON). A specialist in non-lethal weapons, body cams, anti-drone solutions, and digital evidence management software, it’s the number-one company globally in the public security space.
It’s growing at a spectacular rate and has now posted nine consecutive quarters of 30%+ revenue growth.
Looking ahead, I expect the company to continue growing at a rapid pace, because it has many opportunities ahead. One is international expansion – to date most of its growth has come from the US. Another is selling body cams to retailers who are looking to reduce theft.
Now of course, there are no guarantees that Axon will produce explosive returns for me over the next five years. If revenue growth was to slow, the stock – which is priced for strong growth today – could fall or trade sideways.
In a world of persistent social unrest and growing demand for public safety technology however, I see a lot of potential. I’m backing it personally and I believe it’s worth considering for a growth-focused ISA.
Should you invest £5,000 in Axon Enterprise right now?
When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie 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 Axon Enterprise made the list?
Edward Sheldon owns shares in Axon Enterprise and Nvidia
