How I’d invest £20,000 — before the Stocks and Shares ISA deadline

How I’d invest £20,000 — before the Stocks and Shares ISA deadline

With the Stocks and Shares ISA deadline looming, I have been thinking about how I would invest £20,000 right now. Decide my objectives

Before investing £20,000, I would want to decide what my objectives are. To do this, I would focus on three key questions.

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First, am I more interested in growth or income? Some shares may offer both, but others would be more or less attractive depending on whether I was hoping for share price growth or dividends. A simple way to do this would be to assign a percentage. For example, I could go for a 100% growth focus, a 100% income focus, or a 60%/40% growth/income focus.

Secondly, I would think about my timeline. Am I putting the £20,000 aside with the intention of not touching it until I retire? Do I hope it will help me fund school fees in a few years? Or do I want to start generating passive income in the next several months? My investment horizon may influence what sorts of shares I decide to buy.

Thirdly, I would think about my risk tolerance. £20,000 is enough to let me comfortably diversify my Stocks and Shares ISA across different businesses. That will help reduce my risk if a particular share does badly. But I can also decide whether I want to stick to blue chip companies with proven business models, or racier startups that are yet to turn a profit but might have dynamic growth prospects. I think figuring out my own risk tolerance will help me zoom in on certain kinds of businesses. But even then, no share is ever free of risk. Draw up a long list

Based on that, I would set aside a couple of hours to sit down and draw up a long list of companies I might be interested in investing in. Those could be companies in which I have already invested, as well as ones that would be new to my portfolio.

Next I would put those companies into priority order from most to least attractive, based on how well I felt they might perform and also their fit with my objectives. Once I had my top 10, I would focus on them. In fact, depending on my risk tolerance and how much I wanted to diversify, I might zoom in on just the top five.

From this list, I would think about how splitting my £20,000 equally between them could fit my objectives. For example, on my own list I might include financial services companies such as M&G , Direct Line and Legal & General . But I do not want to concentrate my portfolio too heavily in a single business area. So, with three financial services in my top 10, I may cross out the least attractive of them and add the next company on my list. Split the money

I would then decide how to allocate my £20,000 to these companies I have chosen. I could do this simply by splitting it evenly between them, or by putting more into the ones I liked best.

My preferred approach would be to split the money evenly. Remember – I have already spent time choosing the shares I think have the best prospects. So, my top five or ten shares should hopefully all be companies I think have solid prospects. But I do not know exactly how each one will do. Spreading my money equally between them means I will not suffer as much when a share does badly as if I had put a large amount of my funds into it. Finding shares for a Stocks and Shares ISA

I do not think it would be difficult for me to find businesses I felt […]

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