When I started on my investment journey, I thought the whole thing was incredibly daunting. For what I’ve heard, many other investors feel the same. However, I’ve since learned that investing doesn’t have to be complicated. And by setting up a simple monthly investment plan in my Stocks and Shares ISA, I’ve been able to accrue a large financial nest egg.
Stocks and Shares ISA investing
I think the best way to start is to set up a monthly investment plan. Most online stockbrokers now offer this option. From as little as £25 per month, investors can select an investment to buy regularly. All that’s needed is to set up a direct debit, and the computer can take care of the rest.
Considering the uncertain outlook for the global economy, I’m using a diversified investment strategy for 2021. What this means is I’m concentrating on passively managed index funds and investment trusts. These investments hold a broad array of businesses.
As we don’t know what the future holds for the global economy, and how long the pandemic will continue to drag on, it’s impossible to tell at this stage which companies will prosper and which will struggle in 2021.
That’s why I’m following the diversified approach for my Stocks and Shares ISA. While it’s impossible to tell which companies will succeed in the short term, I’m optimistic that, in the long run, the UK economy will prosper.
I’m also investing some money in international funds. Global diversification is something many investors tend to overlook. I think that’s a mistake. Exposure to regions such as the United States and Asia could provide access to some of the fastest-growing companies in the world.
However, investing in these markets directly can be challenging. That’s why I favour international investment funds. These fund managers do all the hard work, so I don’t have to worry about different tax rules or accessing foreign stock exchanges.
Monthly investing
Another benefit of setting up small monthly investments is pound cost averaging. Put simply, this is the process of buying a set amount of an investment every month. Doing so irons out market volatility. For example, in a falling market, £50 will go much further than in a rising market.
To put it another way, by using pound cost averaging one can automatically buy more stock when the market falls and less when it rises. Research shows that acquiring shares when they’re trading at low levels leads to higher returns in the long run. That’s why I think this strategy makes so much sense.
That’s the strategy I plan to use in my Stocks and Shares ISA for 2021. By following this strategy, my figures show it’ll be possible to turn a small investment of £50 a week into a large lump sum over the next few decades.