The deadline for investors to add money to a Stocks and Shares ISA is fast approaching. They have until 5 April to use their £20k contribution allowance.
This is a use-it-or-lose-it allowance, so any unused quota isn’t rolled over into the next tax year. However, the £20k quota is refreshed in the new tax year. There’s nothing stopping investors from adding £20k on the 5th and another £20k on the 6th when the new tax year begins.
Once the money’s in the ISA, there’s no rush to invest the cash. Investors can take their time to find the companies they want to buy into. But, research shows that by investing ISA cash sooner rather than later, it may be possible to generate higher returns over the long term.
And with that in mind, here’s the roadmap I’d use to invest £20k in a Stocks and Shares ISA.
Investment roadmap
I don’t have £20,000 to invest today, but I plan to invest a smaller amount in my ISA. I’m going to use the same investment strategy as I would with the whole amount.
I plan to focus on buying cheap UK stocks as well as investment funds. I believe this could offer me the best of both worlds. Access to what I think are deeply undervalued UK equities and exposure to faster-growing businesses, where I don’t have as much experience.
ISA’s could be one of the best ways to own high-growth stocks. Any income or capital gains earned on assets held inside one of these wrappers doesn’t attract additional tax.
On that basis, one investment fund I’d buy is the Herald Investment Trust. This trust has a strong track record of finding high-growth stocks in the technology, media and telecommunications sector.
While there’s no guarantee the company will outperform the market in the long term, it has an experienced team of stock pickers. I think these analysts are more likely to find the market’s undervalued growth stocks than I am. That’s why I’d buy the trust for my Stocks and Shares ISA.
Stocks and Shares ISA blue-chips
Alongside the growth trust, I’d buy a basket of blue-chip shares. I think companies such as AstraZeneca and GlaxoSmithKline could offer an attractive blend of income and growth.
Of course, their growth isn’t guaranteed, and there’s always going to be a risk these businesses could cut their dividends. So, these might not be the best investments for all Stocks and Shares ISA owners. Nevertheless, I think they meet my personal finance goals.
Elsewhere, I’d also buy United Utilities. As one of the country’s largest water utilities, I think this business can provide a steady income for shareholders using the revenue from the provision of water and wastewater services to customers. Regulators are the most significant challenge the group faces. If they reduce the amount of profit the business is allowed to make, that could impact shareholder returns.
Still, as an income play for a tax-efficient Stocks and Shares ISA wrapper, I’m encouraged by the outlook for Untied.