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How I’d invest £100 a month in a Stocks and Shares ISA in 2022

Image of person checking their shares portfolio on mobile phone and computer

I find a convenient way for me to invest in the stock market is through a Stocks and Shares ISA. Drip feeding some money into an ISA regularly in 2022 could allow me to build up an investment pot. I would be able to use that to invest in a variety of shares.

If I allocated a spare £100 a month in 2022 to doing that, here is the approach I would take.

Clarify my objectives

First, I would decide exactly what I wanted to achieve. For example, I may want to focus on passive income. £100 a month adds up to £1,200 a year. So if I invested it in shares with an average dividend yield of 5% I could hope to earn around £60 of passive income in a year.

Or I may decide that I wanted to tuck the monthly £100 away and try to grow the value of the ISA over time by targeting share price growth. In that case, I may weight my balance towards growth rather than income shares.

What I decide depends on my own situation and aims. But getting clear about it would help inform my own investment strategy. Whether I opted for growth, income, or a combination of both, I would reduce my risk by diversifying across different companies and business sectors. With £100 a month I could comfortably diversify across four different companies in a year, investing £300 in each.

Choosing the shares

It would also be worthwhile for me to think about whether I wanted to choose shares myself. An alternative would be for me to invest my ISA money in funds whose managers choose which shares to buy. They may do that based on their own criteria, or by mirroring a well-known index like the FTSE 100.

Investing in a fund could help me diversify quickly. But it may also add costs in the form of the fund management fees.

Two income shares I would consider

If I wanted to pick my own shares, for income two of my first choices would be British American Tobacco and Diversified Energy, which yield 6.9% and 10.5%, respectively.

I like British American Tobacco for the strong cash flows from its iconic brands like Lucky Strikes. One risk is the company’s debt pile. Servicing that as interest rates rise could reduce the money available to pay dividends.

Diversified Energy operates over 60,000 natural gas and oil wells. With energy prices currently high I think profits could be substantial, although if prices fall in future that could hurt earnings.

Two growth shares for my Stocks and Shares ISA

For growth, two shares I would buy in a Stocks and Shares ISA would be JD Sports and S4 Capital.

I like the sports retailer because its proven formula of selling famous brands at keen prices is highly profitable. Last week it upgraded profit forecasts for the coming year and I see substantial growth opportunities in overseas markets like the US. Some of those markets have strong competitors, though, which could hurt profitability.

After a recent share price fall I see a buying opportunity for my Stocks and Shares ISA in S4 Capital. The digital ad agency holding group expects to double revenues and profits organically in a three-year period. Acquisitions could add further growth, though rapid growth could also add central costs that may eat into profit margins.

The post How I’d invest £100 a month in a Stocks and Shares ISA in 2022 appeared first on The Motley Fool UK.

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Christopher Ruane owns shares in British American Tobacco, Diversified Energy, JD Sports and S4 Capital. The Motley Fool UK has recommended British American Tobacco. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.