The Stocks and Shares ISA deadline is fast approaching. I’ve got until 5 April to use up any remaining allowance. The current maximum permitted in an ISA for an individual is £20,000 per tax year.
I reckon that’s pretty generous and look forward to using as much of my allowance as possible. Of course, policies can change and that sum could be reduced one day.
But for now, I’m looking at how I can invest £10,000 in the coming weeks. Although I don’t need to decide right away regarding how to invest my ISA, I’d like to take the opportunity to invest during this stock market correction.
Taking the opportunity
Investing should be about the long term, in my opinion. As I’m trying to invest for over five years, any time could be a good time to deploy fresh cash. It’s often said that time in the market beats timing the market. If I can continue to hold quality shares for many years, I should be able to ignore any short-term share price gyrations.
That said, the stock market sometimes presents gifts in the form of share price dips. And I often find it can be a good opportunity to top up my shares.
For instance, there was an excellent investment opportunity during March 2020 in the early days of the pandemic. In that instance, share prices rebounded almost as fast as they fell.
Although it doesn’t always happen like that, investing when there’s so much uncertainty is something that could be potentially lucrative.
Billionaire Warren Buffett once said that investors should “be fearful when others are greedy, and greedy when others are fearful”. It’s a philosophy that seems to have served him well over the years, and one that I try to follow for my own Stocks and Shares ISA.
Stocks and Shares ISA: The plan
So what should I invest in? First I’d buy some low-cost index exchange traded funds (ETFs). I reckon that owning a basket of US and UK shares is enough to give me the global exposure that I want. That’s why I’d buy an index tracker for the S&P 500 and one for the FTSE 100.
As it’s a long-term investment and I’m a firm believer in innovative companies, I’d also buy a Nasdaq 100 tracker.
Next, I’d venture out into some individual companies. With this approach, I’d aim to achieve better returns than the stock indices. A word of warning though. Picking my own shares is riskier as there are so many factors to consider. But I aim to reduce the risks through research and diversification.
I’d pick a basket of carefully chosen shares from a range of industries. For instance, on my FTSE 100 watchlist right now I’ve got BP, Diageo, Rio Tinto, BAE Systems and Experian. It’s a spread of growth and defensive shares. All five picks are established names with strong balance sheets. Overall, they also provide me with an above-average dividend yield. And by reinvesting this dividend cash, I should be able to grow my Stocks and Shares ISA even more.