I’m in the process of transferring a Cash ISA into my Stocks and Shares ISA. As a result, I’m expecting to have around £7,500 to invest.
There are two reasons I’m transferring my Cash ISA. The first is that I think interest rates are unattractive and the second is that I think stocks offer a better return at the moment.
At the moment, my Cash ISA is paying 1% interest. With inflation at around 10%, that means I’m losing purchasing power each year by leaving my money in cash.
Time to do something about that. My plan is to take my cash and invest in businesses that I think will help me grow my wealth over time.
Growing wealth
Since I’m looking to grow my wealth, I need companies that can retain earnings and reinvest them at good rates. This is what will increase the value of my investments.
It’s also important that I don’t overpay for any investment that I make. If I pay too much, the business won’t generate enough cash to offer me a return on my investment.
As Warren Buffett says, no business is worth an infinite amount of money. But I think that there are some opportunities for me at the moment.
Stocks to buy
Top of my list of stocks to buy is Berkshire Hathaway. In terms of retaining cash and using it intelligently, I think it’s top of the class.
Berkshire’s business relies on growing by acquisition. That means that there’s always a risk of overpaying – something that Berkshire has done in the past more than once.
But the company’s mistakes tend to be small in the grand scheme of what I see as a powerhouse of a business. That’s why I’ll be looking to buy shares.
I’m also looking at Rightmove. The UK’s largest property platform has a dominant market position that I think will be hard to disrupt.
The company has huge margins and relatively little in the way of cash requirements. I see this as a powerful combination.
Rightmove stock isn’t cheap and this presents a risk. The business needs to grow in order to justify the current price.
But Rightmove has done well here. The company has grown its earnings at an average of 13% over the last decade, which makes me optimistic about the business going forward.
Lastly, I think that shares in Diploma are trading at really attractive prices at the moment. I don’t currently own this stock, but I’m looking to make it a significant part of my portfolio.
With a recession coming up, a distributor of industrial components might seem like a strange choice. But I think that it’s less of a risk than it first seems.
Diploma focuses on components that are inexpensive, but indispensable. As a result, I’m anticipating less economic sensitivity than might otherwise be expected.