The Stocks and Shares ISA deadline for 2021/22 passed in early April. Looking forward, I have just under a year to make use of up to £20,000 if I have that much. Funds that I invest now in my ISA are sheltered from capital gains tax when I come to sell (hopefully with a profit). So with the new ISA year, here are three ideas I want to put to work with an initial £2k.
Seeking dividend-payers
I think one key theme that’s going to impact me as an investor this year is high inflation. Last week, the latest inflation reading came out of the UK at a whopping 7%. This means the erosion of the value of my cash is now quite significant.
One way I can help to reduce this impact is by investing my money in stocks that pay out generous dividends. Companies such as Rio Tinto and M&G offer me dividend yields in excess of 7% at the moment. Although future dividends aren’t guaranteed, if they get paid at the same level going forward, this income can help to reduce the impact of inflation.
Further, the benefit of my Stocks and Shares ISA is that my dividends aren’t subject to dividend tax. This allows me to keep more of the payment for myself.
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Allocating money to defensive stocks
With some of my initial £2k, I want to put £500 towards some defensive stocks. Such companies typically hold their value better during times of distress. So why might I think about buying now?
The dreadful conflict in Ukraine is still raging on, and news headlines present an ongoing risk to the market. Add into the mix the cost of living crisis in the UK, and we could see economic data get worse if Britons start to tighten their belts.
Therefore, I’d consider buying a utility company like National Grid or a supermarket like Tesco for my ISA.
A Stocks and Shares ISA for the future
Finally, I’d put a chunk of my £2k straight into renewable energy stocks. At a broader level, I’d term this idea as investing in the key themes for the future. I think renewable energy is going to be a major area of focus over the next decade.
This is a wide sector that encompasses a range of stocks. For example, I’d include electric vehicle (EV) manufacturers. I’d also look at some smaller stocks outside of the FTSE 100 that are involved in lithium or other alternative resources. These might need to sit in my Stocks and Shares ISA for a while before I see a meaningful share price uplift, but I think the rewards could be large.
Although I can tweak the amount I allocate to each of these ideas with my £2k, I want to make sure that I include all three. This will give me a balanced Stocks and Shares ISA and one that should help me navigate the markets.