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How I’d invest £10k in a Stocks and Shares ISA before the deadline

Fans of Warren Buffett taking his photo

There’s just one month to go before the deadline to use my Stocks and Shares ISA allowance for this tax year. I’ll be able to add money to my ISA until midnight on 5 April.

As I still have some allowance remaining, I’m looking at how I’d invest £10,000 right now.

Investors should note that it’s not necessary to invest as soon as funds are added to an ISA. Money can sit and wait in cash until I’m ready.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Riding the waves

Global stock markets are experiencing challenging times. Rising inflation could result in higher interest rates. And growing borrowing costs often leads to a slower economy.

That said, the economy rises and falls in a cycle. And it’s not necessary to try to predict its every whim. Instead, I’d look at stock market history to provide some indication of what I could expect.

Despite a few significant periods of weakness during the 2008 financial crisis and 2020 Covid panic, the FTSE 100 has still managed to achieve an average return of 8% a year.

That means if I had invested £10,000 in the FTSE 100 index two decades ago, I’d currently have around £46,000. That sounds pretty good, but where it gets even more interesting is if I make regular investments.

Let’s run the numbers again but this time assume I invested £10,000 every year. If I stuck to this plan for the past 20 years, I calculate that I would’ve built a pot worth a whopping £450,000.

Filling a Stocks and Shares ISA

Bear in mind that the coming years might result in a different result. But as it’s an average over such a long period, I’m happy to use this assumption.

But where exactly should I invest? I could put all my money in a FTSE 100 index tracker. As the name suggests, this type of fund closely replicates its underlying shares. As a low-cost option, I’d invest half of my £10,000 in this.

But I reckon I can achieve a much greater return than the Footsie by selecting a few individual shares too. I’d opt for some smaller companies with greater growth potential. It could be a bumpy ride in the short term. But if I pick well, I reckon my shares could vastly outperform the Footsie.

Which shares?

To narrow down my options, I’d look for shares that have a strong competitive advantage. This could be in the form of superior technology or established brand. Popular investor Warren Buffett famously refers to this as a moat.

Next, I’d opt for high-quality rather than cheap. Return on capital employed is a good measure of business quality. It’s also a feature frequently highlighted by veteran investor Terry Smith.

I’ve filtered down a few top picks that I’d add to my Stocks and Shares ISA as soon as practically possible. These are Games Workshop, Howden Joinery, and Greggs. I’d use the second half of my £10,000 to buy all three.

The post How I’d invest £10k in a Stocks and Shares ISA before the deadline appeared first on The Motley Fool UK.

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Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Games Workshop Group Plc and Howden Joinery Group Plc. 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.