As Stocks and Shares ISA season approaches, here’s my plan

There is now less than a month until the deadline for contributions to a Stocks and Shares ISA in the current tax year. This does not mean that the contribution must be invested at that time. But I find it can be a useful point in the year to stop and consider what to do with the cash in the ISA itself.

Here’s the approach I’m going to take.

Mix growth and income

Should I buy growth stocks, do I have great prospects for building profits in the future? Or should I use my Stocks and Shares ISA to build a passive income stream thanks to the dividends I can receive?

I don’t think the answer has to be one or the other. But, I’m going for a bit of both.

Looking at ISAs as a long-term investment vehicle, I think the income opportunities they provide are quite substantial. I have some fairly high-yielding shares such as ITV. Not only can the shares pay substantial dividends over the years, but by combining them in an ISA, I can build my portfolio even if I don’t invest any additional money.

But growth potential is also on the table, as my shares are in companies like digital ad agency networks S4 Capital. My plan here is simple: use the money in the ISA to buy some stocks that I think have a medium to long-term business growth story, so I ignore them for years while I wait for the business to prove itself.

Keep it simple – but variety

I’m sure I’m not the only investor who sees a stock triple or quadruple and then thinks, “if I had invested my full ISA allowance last year I would have £60,000 by now!“

But while some stocks are rising, many are not. It’s easy to just focus on the winners, something behavioral psychologists call a survivor bias. But if I had invested all my Stocks and Shares ISA into a company that later went bankrupt, I would be left with nothing.

That explains why I always keep my portfolio diversified. A comfortable £20,000 ISA will allow me to do that, splitting the money between five to 10 companies.

But I still try to keep it simple and rewarding, by investing in a limited number of what I see as a brilliant business instead of a larger number of companies I am just good enough. In investing as in life, the good is the enemy of the great.

Build My Stocks and Shares ISA

Finding a great business is not difficult in my opinion. But managing to find great businesses that also have attractive share prices is possible.

That’s why I take my time. Although there is an annual deadline for contributions to the ISA, I am not in a rush when it comes to investing that money. So I patiently hunted for various companies selling at good prices that I thought could help me build wealth.