The Stocks and Shares ISA is a great investment vehicle enabled by the government. It allows me to build up a pot of investments within a specific account that is free from capital gains tax. This tax would normally be charged when I fill out my tax return each year. However, due to my ISA, I can buy and sell without needing to worry myself about it. With the new ISA year having begun in April, here are the stocks I’m looking at for my 2021 allocation.
Growth stocks
Each year, I want to allocate a good proportion of my Stocks and Shares ISA amount to growth stocks. This is because I’m still relatively young (cue the old man jokes) and so I’m ok to take on higher risk. Usually, growth stocks have higher volatility than others, but I’ve got a long enough time horizon to deal with this.Â
For this year, I’m looking to buy growth companies that could take advantage of the reopening economy. These include Watches of Switzerland, Grainger and Greggs. I think a mix of all three allows me to get good exposure to the key areas I feel could perform well.
It’s not guaranteed, of course and they could perform worse than I expect. That said, rebounding retail spending and sales should aid watch and luxury purchases. A return to the workplace for some should provide a boost for a bakers like Greggs. Finally, higher rental demand for properties as people start to mobilise again should aid Grainger.
Dividend stocks
Aside from trying to make gains for my Stocks and Shares ISA through capital appreciation, I also want to look towards dividend payouts. This helps to balance out my overall investment pot. If my growth stocks underperform for some reason, then I’ll be able to fall back on the income I’m getting from the dividend stocks.
Although I want to target yields above the FTSE 100 index average, I want to stick to names that I’m comfortable with. To this end I’d look to buy National Grid, SSE and Legal & General. In my opinion, these companies are sustainable dividend payers, and shouldn’t give me a lot of headaches from having to sell and find other dividend stocks in the near future.
The above examples offer a dividend yield currently between 5% and 6%. I’m happy at this level, and so would look to invest regularly to build up exposure here. Obviously, the yield changes as the stock price fluctuates. So one potential risk here is that over the next year of populating my Stocks and Shares ISA, the dividend yield could fall.
Opportunities for my Stocks and Shares ISA
Based on the above, there are lots of opportunities for me to target. Unless I have a lump sum of £20,000 ready to go, I’ll be looking to invest regularly each month to ensure I maximise my allocation by April 2022. I don’t see this as a bad thing, as over the course of the year there might be fresh growth or dividend stocks for me to buy.