The Stocks and Shares ISA is a very powerful investment account. Not only does this type of ISA offer a vast range of investment options, including shares, funds, investment trusts, and exchange-traded funds (ETFs), but it also shelters all capital gains and income from the tax man.

Given this brilliant combination of a wide range of growth assets and no tax, it’s possible to build up a substantial sum of money within a Stocks and Shares ISA over time.

If I was to invest £500 a month, for example, I could end up with a million or more within my account by the time retirement comes around. Here’s a look at how I could generate that kind of money by drip-feeding money into my ISA on a regular basis.

Building a £1m+ ISA

Let’s say I put £500 a month (£6,000 a year) into my Stocks and Shares ISA. And let’s say I’m able to generate a return of 9% a year (more on this below) on my money over the long run.

Running the numbers, I calculate it would take me about 33 years to build up £1m within my account if I was to start from scratch. In other words, if I started saving and investing at the age of 30, by the time I got to 63 (well below the State Pension age), I’d be at the million-pound mark.

Now luckily, I don’t have to start from scratch today. I began saving into my ISA around a decade ago and, since then, I have built up a healthy balance within my account.

I’m still a long way off the million-pound mark. However, I’m on track to get there. If I continue to drip-feed money into my account on a regular basis, and earn a decent return on my capital, I should reach my goal before I retire.

Generating 9% per year

What about the 9% per year return though? How am I going to achieve that kind of return within my Stocks and Shares ISA? Well, I reckon a 9% return is achievable (over the long run) with a diversified mix of high-quality funds, investment trusts, ETFs, and individual stocks.

One fund I’ve invested in is Fundsmith. This is a global equity fund that focuses on high-quality businesses. It’s managed by portfolio manager Terry Smith (who is sometimes called ‘Britain’s Warren Buffett’). Since its launch in late 2010, it has delivered an annual return of about 15.5% (although past performance is not an indicator of future performance).

As for individual stocks, I’ve invested in quite a few. Not only have I targeted high-quality UK stocks like Diageo, Unilever, and Rightmove, but I’ve also invested in high-quality US stocks such as Amazon, Microsoft, and Visa. All of these companies have been good long-term investments in the past and appear to have plenty of potential going forward.

Now there’s no guarantee this approach to investing will generate a 9% return a year, of course. I have to accept that returns can be lower. However, given that the stock market has historically delivered returns of around 7-10% a year over the long run, I feel my investment returns should be attractive.

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.

The post Drip-feeding £500 a month into my Stocks and Shares ISA, could generate a million+ for retirement appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Ed Sheldon has positions in Amazon, Diageo, Microsoft, Rightmove, Unilever, and Visa. The Motley Fool UK has recommended Amazon, Diageo, Microsoft, Rightmove, and Unilever. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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.

Investing in a Stocks and Shares ISA is one of the best ways to build long-term wealth in the UK. These ISAs offer access to a wide range of growth assets including UK shares, international shares, investment funds, and exchange-traded funds (ETFs). More importantly though, all gains are completely tax-free.

I have a Stocks and Shares ISA and contribute to it every year. I’m convinced that if I invest into it regularly, I can build up a substantial sum of money within my account before I retire. With that in mind, here’s a look at how I’d invest £20,000 (for the long term) in my ISA today.

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.

Investment opportunities

There are many different ways to generate wealth from the world’s financial markets. However, one of the easiest ways, in my view, is to capitalise on powerful long-term trends. These can create lucrative opportunities for investors.

Arguably the biggest trend worldwide today is the adoption of technology. Online shopping, mobile payments, video streaming, working from home… we’re all using technology more. And I think this is just the beginning. To my mind, this trend is only likely to accelerate in the years ahead.

So how can I play this theme within my Stocks and Shares ISA?

Technology giants

Well, I reckon a good starting point is the mega-cap technology stocks such as Apple, Alphabet (Google), Amazon, and Microsoft (all US-listed). If I was to invest in these companies, I’d get exposure to smartphones, cloud computing, video and music streaming, digital advertising, e-commerce, artificial intelligence (AI), electronic payments, and much more.

However, I’d also want a bit of exposure to semiconductor companies. Semiconductors are essentially the ‘brains’ of all modern electronics, powering everything from computers to microwaves. One company I’d invest in here is Nvidia, which designs high-performance hardware for gaming, data centres, and AI. I’d also invest in companies that make semiconductor manufacturing equipment such as ASML.

UK shares

It’s worth pointing out that it isn’t essential to invest in US stocks to get exposure to technology. On the London Stock Exchange, there are plenty of innovative tech companies, particularly in the small-cap space.

Some examples of UK tech stocks I like include property home-finding website Rightmove, identity management specialist GB Group, and digital transformation outfit Kainos. I’d buy all three for my ISA today.

Diversifying my ISA

Of course, I wouldn’t want to go ‘all-in’ on tech. I’d need to have exposure to other sectors to reduce risk. One sector I’d certainly want to have exposure to is healthcare.

Over the long term, healthcare should benefit from the world’s ageing population (another major trend). Smith & Nephew, which specialises in joint replacements, is one stock I’d buy here.

Consumer staples could also be a good diversifier. A stock I’d buy here is alcoholic beverages company Diageo. In the long run, it looks set to benefit from rising wealth across the emerging markets.

Long-term gains

I’ll point out that this growth-focused strategy is a higher-risk approach that could be volatile at times. In the short term, I’d expect the value of my Stocks and Shares ISA to fluctuate.

However, in the long term, I’d expect this approach to generate strong returns. And build up my wealth significantly.

The post How I’d invest £20,000 in a Stocks and Shares ISA today to build long-term wealth appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Ed Sheldon has positions in ASML Holding, Alphabet (C shares), Amazon, Apple, Diageo, GB Group, Kainos, Microsoft, Nvidia, Rightmove, and Smith & Nephew. The Motley Fool UK has recommended ASML Holding, Alphabet (A shares), Alphabet (C shares), Amazon, Apple, Diageo, Kainos, Microsoft, Rightmove, and Smith & Nephew. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. 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 week, the Bank of England (BoE) hiked the UK’s interest rates to 1%. The central bank also forecast that the UK economy will contract later this year, as disposable income decreases. With uncertainty surrounding the future of the UK’s economy, here are two stocks I’m avoiding for my Stocks and Shares ISA, and one I’m planning on buying.

Losing interest

In theory, banks such as Lloyds (LSE: LLOY) usually stand to benefit from higher interest rates. This is because banks can charge more for loans. Moreover, the rapid increase in house prices has brought a healthy stream of revenue to Lloyds. Nonetheless, the Lloyds share price is down 10% this year.

I’m avoiding this stock as I’m worried the bank’s profit might take a considerable hit from lower borrowing numbers and a slew of potential bad debts. With the BoE set to continue increasing interest rates in the coming months, Lloyds’ best-case scenario seems unlikely to happen at this point. Why? Well, the bank rate could rise further, which would be a plus for the group. But the BoE predicts inflation to peak at 10% later this year, much higher than the 7.6% upper level Lloyds would like to see. And hoped-for house price growth of 5.3% is dubious, as Nationwide and Halifax predict a slowdown in the market.

Grocery wars

The other stock I’m avoiding is J Sainsbury (LSE: SBRY). Despite being the second largest supermarket in the UK, the orange grocer has been losing a substantial portion of its market share to Aldi and Lidl. Its most recent trading update provided a rather gloomy outlook as well. Management cited, “Significant external pressures and uncertainties, including higher operating cost inflation”. This sent its stock price lower to £2.27.

Prior to the current cost of living crisis, Sainsbury’s was already operating on slim profit margins (2.3%). Now with pressure to keep prices low in order to avoid losing more market share, the retailer could very well see its margins contracting. Ultimately, Sainsbury’s will have to perform a balancing act of maintaining margins and holding its market share. Having already such low margins, this is one stock I’m unwilling to gamble with.

An ETF to stock up on

But there’s a stock I believe can add value to my Stocks and Shares ISA. It’s an ETF — Vanguard’s S&P 500 UCITS ETF (LSE: VUSA). The ETF tracks the USA’s top 500 listed companies, and averages a return of approximately 10% per year. Research has shown that almost 80% of fund managers underperform Warren Buffett’s favourite index. Therefore, while I generally like to pick my own stocks, I’m unwilling to gamble on professional managers’ stock-picking to beat the market. Although the heavyweight index is almost 15% down this year, it has a solid record of recovering from crashes.

Even better, Vanguard’s fund has outperformed the S&P 500 by 10%. This is due to its ability to hedge against the British pound by using the strength of the US dollar. On that basis, I think this is the best stock I can invest in to generate meaningful returns over a long period.

The post 2 stocks to avoid and 1 to buy for my Stocks & Shares ISA in this bear market appeared first on The Twelfth Magpie.

More reading

• Is there any value left in Lloyds shares now they’re over £1?
• Prediction: this UK growth stock will outperform Lloyds shares over the next 5 years
• Barclays, NatWest or Lloyds shares: which is the better pick for a UK retirement portfolio?
• Here’s how much I think Lloyds shares will be worth by the end of 2027
• How to target a tax-free passive income of £1,275 a month on top of your State Pension

John Choong has no position in any of the shares mentioned at the time of writing. The Motley Fool UK has recommended Lloyds Banking Group and Sainsbury (J). 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.

A new tax year starts on 6 April, and with it comes a renewed £20,000 ceiling that I can invest in my Stocks and Shares ISA. So, here are the three best stocks I’m buying to try to beat the market!

Stock pick #1 – Alphabet

Warren Buffet has always said that the best companies are those that exhibit solid fundamentals, strong earnings power, and the potential for continued growth. Alphabet (NASDAQ: GOOGL) manages to tick all these boxes. With a strong balance sheet, a 29.5% profit margin, and plenty of room for earnings growth with some analysts predicting a 22% upside to its current share price, the Google-parent stock is a no-brainer for me. Furthermore, despite having legal challenges as a big tech company, Alphabet has a history of outperforming the S&P 500. Its upcoming stock split this summer could work wonders for the share price as well. History has shown that stock splits tend to boost share prices as they encourage higher trading volume. Therefore, a solid balance sheet accompanied by strength in the search engine and advertising space makes Alphabet a hybrid defensive-growth stock for my Stocks and Shares ISA.

Stock pick #2 – PayPal

Although the PayPal (NASDAQ:PYPL) share price is 60% off its all-time-high, I think the fintech company still has plenty to offer. Despite a miss on its earnings last quarter, I am excited by PayPal’s revised business model. The platform is targeting more activity per user rather than more users. This is music to my ears because I value quality over quantity. Its partnerships with Amazon, Starbucks, and Doordash to integrate Venmo, an American mobile payment service it owns, will also provide a boost to its revenue. Its previous partnership with eBay generated a sizeable portion of revenue, showing me that PayPal has had some historical success. It could, however, suffer the effects of a high interest rate environment as transaction volume could slow down. Despite its interest income segment earning it revenue, it might not be sufficient to keep investors happy. Yet it’s also hedged against such a potential slowdown. The firm’s interest income segment hedges against rate hikes as it stands to earn revenue from interest too.

Stock pick #3 – Astra Space

Next up on my list is Astra Space (NASDAQ: ASTR). Astra sends small rockets into space to deliver satellites and other payloads for its commercial customers. As a pre-profit company, Astra carries a high level of risk, but with it also comes a high potential upside to its current share price. Since the Alameda-based company launched its first successful payload in March, the share price has shot up 21%. With more launches lined up and monthly launches planned for the rest of 2022, there could be room for the share price to continue growing. Astra also boasts a flawless balance sheet with zero debt, adequate cash levels, and a healthy cash burn. This gives me plenty of confidence to continue buying Astra shares as there is a low probability that the company will need to raise capital in the near future.

No dividends

These are all growth stocks with no official dividends. Nevertheless, the potential upside to the stocks’ share prices offsets the growth of regular dividend-paying stocks, in my opinion. This is why I’ll be buying all three stocks for my portfolio.

The post My top 3 picks for my Stocks and Shares ISA! appeared first on The Twelfth Magpie.

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• This famous growth share’s doubled in a year. Too late to buy?

John Choong owns shares of Alphabet (Class A shares), Astra Space, and PayPal at the time of writing. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and PayPal Holdings. 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.

With the 2021/22 ISA deadline not far off, I’ve been thinking about investment funds to buy for my Stocks and Shares ISA. Buying funds within this kind of account can be an effective wealth-building strategy, as all capital gains and income are tax-free.

Here, I’m going to highlight two that strike me as great ISA investments now. I think they have the potential to boost my wealth significantly in the future.

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.

A top fund for my ISA

When it comes to top picks for an ISA, it’s hard to look past Fundsmith Equity, in my view. This is a global equity fund with an incredible long-term track record.

Fundsmith is managed by portfolio manager Terry Smith, who has a very strict investment process. Unlike a lot of other portfolio managers, who try to get in and out of hot sectors, Smith sticks to investing in high-quality businesses that have solid growth prospects, are very profitable, have strong balance sheets, and are resilient in the face of change.

This approach seems to work very well. Since the fund was launched back in late 2010, it has generated strong returns when markets have been rising. And it has often minimised falls during periods of market weakness. Overall, it has produced a return of around 17% per year since launch, which is very impressive. However, past performance is not an indicator of future performance, of course.

One issue to consider with Fundsmith is that it tends to avoid highly cyclical areas of the market, such as oil companies and banks. Most of it is invested in three main sectors – consumer staples, technology, and healthcare. This could potentially lead to periods of underperformance at times. This year, for example, oil stocks are flying.

Overall, however, I see Fundsmith as a top fund. I’d be very comfortable investing some of my ISA allowance in it this year.

A high-growth fund

For a more adventurous ISA play, I like the Sanlam Artificial Intelligence fund. This aims to provide long-term capital growth through diversified exposure to one of the global economy’s most important and enduring investment themes – artificial intelligence (AI).

When it comes to powerful long-term growth themes, it’s hard to ignore AI. In the years ahead, it’s likely to have an enormous impact on a wide range of industries, transforming many business models in the process. This is likely to create some lucrative opportunities for investors.

I see this fund from Sanlam Investments as a good way to get exposure to the theme. That’s because it seeks to invest in companies whose engagement with AI is likely to make a material difference to their value. Top holdings at present include the likes of Alphabet, Tesla, and Nvidia, all of which look set to be major players in AI. 

It has a good performance track record since its launch in 2017 (an annualised return of 22%), However, I’d expect it to be volatile going forward as it’s a higher-risk product. And if tech stocks continue to fall on the back of interest rate rises, it could underperform in the short term.

However, as a long-term investor, I’m not concerned about what the fund does in the next six months. I’m looking for gains over a five-to-10 year period. And over that timeframe, I expect this fund to generate good returns for my ISA.

The post 2 top funds to buy for an ISA this year appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Edward Sheldon owns shares in Alphabet (C shares) and Nvidia and has positions in Fundsmith Equity and Sanlam Artificial Intelligence. The Motley Fool UK has recommended Alphabet (A shares), Alphabet (C shares), and Tesla. 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.

Investing in the stock market right now takes guts. Awful events in Ukraine combined with a huge rise in the cost of living have sent share prices on a downward trajectory for much of 2022.

That’s why I think it pays to tap into the mentality of those who have seen it all before and still managed to thrive. The first person that springs to mind? 91-year-old Warren Buffett.

Why Warren Buffett?

In case you don’t know, the ‘Sage of Omaha’ is one of the wealthiest individuals on the planet. Importantly for private investors like me, his billionaire status has been built on adopting a strategy that anyone can understand.

Put simply, Buffett buys stock in great companies. According to him, these tend to be businesses that resemble castles that are able to fend off invaders (competition) on a consistent basis, thanks to possessing enviable ‘moats’. The latter might include highly-valuable brands or cost advantages or just being a big fish in a small pond.

But there’s another aspect to Buffett’s strategy, namely how he behaves when the chips are down. The master investor regards inevitable market wobbles as opportunities to buy great stocks that are temporarily on sale. It’s a mentality I’ve tried to adopt over the years and particularly in 2022. I’ll never be as wealthy as Buffett, of course! 

So how might I use this approach now with, say, £20,000 — the maximum amount of cash I’m able to deposit in a Stocks and Shares ISA this year — at my disposal?

5 stocks I’d buy today

From the FTSE 100, I reckon Diageo and Unilever are solid choices. Both boast bursting portfolios of ‘sticky’ brands that consumers will willingly pay for. Their ability to pass price increases on should go some way to helping them navigate through these inflationary times. Supermarket giant Tesco also grabs my interest, thanks to its commanding market share.

From the FTSE 250, Games Workshop seems to tick a lot of ‘Buffett boxes’. The Warhammer brand is incredibly popular around the world, making this very financially disciplined company a leader in a (very) niche market. Out of interest, the shares are down nearly 30% in 2022, as I type. That strikes me as an opportunity to “be greedy when others are fearful“, to quote Buffett. 

iPhone maker Apple is the final pick. Since I’m already locked into its ecosystem through owning a number of its devices, I’m highly likely to stick with the tech titan when the time comes to replace them. I sincerely doubt I’m alone. This brings to light another ‘moat’ quality, namely the hassle involved in switching. It should come as no surprise that Buffett owns a huge slice of Apple already. 

Buyer beware

Naturally, adopting the approach of a highly successful investor like Buffett doesn’t guarantee anything. As we’ve seen, the share prices of even the best stocks can still tumble in the face of unexpected global events.

This is why it’s essential to spread my cash around companies in different sectors. Although a big fan of running a concentrated portfolio, you’d never catch Buffett investing in just one small part of the market. This ensures he never needs to sell in a panic — something that Fools like me should also avoid like the plague.  

The post 5 stocks I’d buy before the ISA deadline using the wisdom of Warren Buffett appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has recommended Apple, Diageo, Games Workshop, Tesco, 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.

I normally try to use as much of my ISA allocation as feasible at the start of each tax year. Indeed, studies demonstrate that using as much of the allowed amount as feasible, as early as possible, can result in higher tax-free returns.

However, at the end of the day, what counts most is my financial status. It’s not the end of the world if I can’t come up with the whole limit at the start of the tax year. Since there are no restrictions on when I may invest in a Stocks and Shares ISA, I can continue to invest regularly throughout the year. The amount of money I can save during the tax year is the sole restriction and is capped at a maximum of £20,000.

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.

Choosing Stocks and Shares ISA investments

I’d search for both income and growth options while shopping for assets for my ISA. These, I believe, will allow me to balance the portfolio with a range of different stocks and income methods that should add to its value in as many ways as possible.

I’d also seek a combination of mutual funds and individual equities. BlackRock Throgmorton (LSE: THRG) is now one of my favourite investing funds. This trust invests in small-cap growth stocks in the hopes of outperforming the market. It also pays a small 1.3% dividend yield at the time of writing.

I believe it offers the ideal combination of development and income to meet my ISA objectives.

This trust does, however, impose a performance fee in addition to a usual management fee. In the long term, these fees may eat into my profits. And if the fund doesn’t choose the correct assets, the results might be far worse. These are the major dangers and problems of investing in the stock market through an investment trust.

This is why, for my Stocks and Shares ISA, I would also select a few shares from specific companies I believe to be safer bets.

Single stocks to buy

BAE Systems and Vodafone are two stocks that I would consider purchasing. These firms are attractive income opportunities, with dividend yields of 4% and 6%, respectively. They’re also benefiting from growth tailwinds. Increased defence spending should improve BAE’s sales and earnings. Meanwhile, Vodafone may benefit from the increasing availability and necessity of mobile data.

As time goes on, these businesses may encounter challenges such as increased expenses and competition, which might eat into profit margins. However, given their long-term development and income potential, I believe these companies would be excellent additions to my tax-efficient portfolio.

The post The Stocks and Shares ISA deadline is almost here. How would I invest £20k? appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

James Reynolds 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.

Of course, as a private investor with a Foolish mentality of growing wealth over the long term, I can/should take such swings in my stride. With this in mind, here’s how would I invest £20,000 — the maximum annual Stocks and Shares ISA allowance today.

FTSE 100: buy the best

Rather than snatching at anything that’s fallen heavily, it’s important to invest according to my overall strategy. For me, this means only buying the best growth stocks around. The former approach might pay off if I were able to consistently predict where share prices will go next. Since I know I can’t do this, however, I prefer to focus on businesses with great fundamentals and outlooks instead.

One thing I really like is when a company possesses something that gives it a competitive advantage over rivals. An example that continues to jump out at me from the FTSE 100 is a stock like Diageo. Regardless of geopolitical events or monetary policy, I can be pretty sure that people will still want to drink premium spirits such as Captain Morgan, Johnnie Walker, and Smirnoff. It’s this portfolio of ‘sticky’ brands that also makes Marmite-maker Unilever a strong contender. Luxury product maker Burberry earns a spot for a similar reason. 

Another thing I like are growth stocks that have a near-monopoly in their respective markets. As such, both online vehicle marketplace Auto Trader and property portal Rightmove make the cut. This is despite not being ‘cheap’ in the traditional sense (forward P/Es of 27 and 28, respectively).  

Health and safety equipment manufacturer Halma would be another must-buy. Given ongoing regulation, I have little concern over its ability to continue growing. As a sign of just how reliable it is, the Amersham-based business has increased its annual dividend by 5% or more for the last 42 years! This makes the 20% fall in the share price in 2022 look like a wonderful opportunity to me. 

Since £20,000 will only go so far, the last position I’d take would be in Scottish Mortgage Investment Trust. While this FTSE 100 member has been hit hard by the rotation into value stocks seen in 2022, it’s still a great way of accessing disruptive companies from both the private and public space. 

No guarantees

As mentioned earlier, this strategy suits me personally. However, it does require me to have an interest in regularly following company news. If this weren’t the case, I’d probably be far more comfortable owning an exchange-traded fund that tracks the FTSE 100 index. In this scenario, I won’t outperform the market but nor will I underperform it either.

Another thing worth highlighting is that investing will never be risk-free, regardless of approach. I can’t assume that all of my picks will work out. That’s why it’s important for me to spread my cash around different sorts of growth stocks as I have above.

What I do feel more confident about, however, is that investing when sentiment is weak is likely to pay off eventually. So, regardless of whether I have £20,000 or a smaller amount, I’d have no hesitation in ‘buying the dip’ today.

The post Buy the dip! How I’d invest 20k in FTSE 100 growth stocks today appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Burberry and Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Auto Trader, Burberry, Diageo, Halma, Rightmove, 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.

Fallen star

Let’s not beat about the bush — investors in fast fashion firm ASOS (LSE: ASC) have endured an appalling time of late. Partly due to the rotation away from growth-focused, lockdown winners into value stocks, the share price has tanked 25% in 2022 so far. In the last year, the former market darling’s value has dropped nearly 70%!

Personally, I see this as an opportunity. ASOS still has many attractive qualities, including a growing portfolio of brands and great international growth prospects.  

This is not to say that the share price capitulation isn’t completely unwarranted. ASOS has faced multiple headwinds in recent times, including higher costs and supply chain constraints. The former isn’t exactly great considering margins at this sort of business will never be sky-high. UK-based online clothing retailers have also seen increased competition from overseas rivals such as China-based Shein. Oh, and the big rise in the cost of living isn’t helping any retailer. 

Still, I think these concerns are now starting to be reflected in the valuation. At 21 times forecast earnings, ASOS still isn’t ‘cheap’ in the conventional sense but it’s far more attractively priced than it used to be. The move to the main market from the less-regulated AIM might also help to entice new investors.

Assuming inflation will eventually loosen its grip, I consider the £1.75bn cap a firm ‘buy’ for me at these levels. Half-year numbers are due not long after the ISA deadline passes.

Power up

A second growth stock I’ve got on my watchlist is XP Power (LSE: XPP). This is a company I’ve actually held within my Stocks and Shares ISA before (and made a very nice profit on). Since then, however, the shares have tumbled.

XPP’s valuation is now almost 30% below where it stood this time last year. Is the actual business really 30% less valuable though? I don’t think it is. XP is a leading developer of critical power control solutions for a number of sectors. Once on board, clients rarely leave. It therefore has a bit more earnings visibility than some in the market. 

Speaking of which, it’s worth mentioning this month’s full-year results. Despite multiple headwinds including pandemic lockdowns and component shortages, the company managed to grow revenue by 3% in 2021 (to £240.3m). I think that’s actually quite impressive considering that trade from healthcare customers has inevitably moderated following huge demand in 2020. XP Power also started 2022 with a record order book of £217m. 

Having been caught up in the general market sell-off, the shares now trade on 17 times forecast earnings. The 2.8% dividend, nicely covered by expected profit, is the cherry on top.

Like ASOS, I believe XP will recover in time. Of course, there’s no such thing as absolute certainty and the fact that Covid-19 infections in Asia are on the rise again is not great news for this Singapore-based business. Hence, I would never allow my Stocks and Shares ISA to be overly invested in a particular sector, including this one.

The post 2 growth stocks I’d buy before the Stocks and Shares ISA deadline appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers has now position in any of the shares mentioned. The Motley Fool UK has recommended ASOS and XP Power. 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.

Thanks to my Foolish mentality — and the fact that my problems are tiny compared to those of people in Ukraine — I’ve generally succeeded in taking this not-insignificant wobble in my stride. 

Here’s what I’ve been doing

First, I haven’t sold a single thing. Yes, there’s certainly no guarantee that markets won’t dip lower in the months ahead. Then again, I have no way of knowing whether this will be the case in advance. Getting out now may help stop the bleeding but it will also leave a (costly) financial bloodstain. In other words, it merely turns what is only a potential loss into a real loss.

Second, I’ve taken a quick look at whether anything has truly changed with regard to stocks I own. Without exception, this is thankfully not the case.

Sure, there are some significant headwinds. For example, one of my favourite businesses — Greggs — has fallen heavily on news it might need to raise prices for the second time this year due to rising costs. That’s unfortunate, but I highly doubt the sausage roll seller now faces an exodus of customers compared to businesses devoted to selling big-ticket items. And will Greggs still face this challenge in a few years? I suspect not. 

This brings me to a third thing I’ve been doing, namely adding to my watchlist of stocks I’d be tempted to buy at current levels. Right now, Games Workshop, SDI and XP Power are all in my sights. Whether I end up pulling the trigger is dependent on having available funds to do so, of course. Regardless, I always keep this list running in good times and bad. This should mean that my rationale for investing is solid and I’m not making any impulsive purchases.

Walking away

My last action is both simple and highly effective. Not checking my portfolio at all. 

To be clear, this is not the same as sticking my head in the sand. I know full well that a good chunk of my paper profit has gone up in smoke in recent weeks. But if I know I can’t change the situation, the next best option is to learn to accept it and do something far more productive. This could include finding ways of raising extra cash which can then be deposited in my Stocks and Shares ISA.

That last point is particularly important at this time of the year. After all, the ISA window closes early next month. Whatever of my £20,000 allowance I don’t throw at this tax-efficient savings account will be lost forever. That really matters over the long term, given the wonder that is compound interest. 

Long-term focus

It goes without saying that there are far more important things going on in the world right now than volatile share prices. Even so, I remain convinced that ‘this too shall pass’ just as all stock market crises have.

For someone not planning on touching his Stocks and Shares ISA for a couple of decades, that simple mantra is good enough for me.

The post My Stocks and Shares ISA has tanked. So I’m doing this appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

Paul Summers owns shares in Greggs. The Motley Fool UK has recommended Games Workshop and XP Power. 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.