With the ISA deadline less than two weeks away (5 April), and investor interest high at this time of year, today I’m providing readers with a look at how I’m investing my own ISAs this year. I own both a Stocks and Shares ISA and a Lifetime ISA and I’m using these vehicles to save for retirement.
Investment goals Before I reveal my investments, it’s worth discussing my objectives in more detail. Ultimately, my ISA savings goal is to build a sum that will last throughout retirement and allow me to enjoy a comfortable standard of living in my later years. Right now, retirement is still quite a way off as I’m in my late 30s, so my investment horizon is certainly long-term.
I’ll also point out that I’m a risk-tolerant investor, meaning I’m happy to take on some risk in the pursuit of healthy investment returns. With that in mind, let’s move onto my investments.
Dividend focus Currently, the bulk of my ISA money is invested in dividend-paying FTSE 100 stocks and investment trusts. The reason behind this is that I’m convinced a dividend investing strategy is one of the easiest ways to generate wealth from the stock market because you can constantly reinvest your earnings and build up your portfolio.
Currently, I own around 20 individual dividend stocks and the top holdings are Legal & General, DS Smith, Unilever (LON:ULVR), Shell (LON:RDSa) and Prudential (LON:PRU). I also own a number of dividend-focused investment trusts, including City of London Investment Trust and Murray Income Trust, which bring a little more diversification to the table. Both have excellent long-term dividend track records.
Overall, this dividend segment of my portfolio – which currently makes up around 70% of my total ISA money – is designed to generate slow, steady returns and build up a growing income stream that I could potentially live off one day.
Growth funds and stocks Next, around 20% of my ISA capital is invested in more growth-focused investments. This segment of my portfolio is designed to achieve slightly higher returns than the dividend segment. I’ve split this money over a few funds and stocks.
In terms of funds, I currently have positions in the Lindsell Train Global Equity fund, the Fundsmith Equity fund and the Marlborough Multi Cap Income fund. These are all funds with unique investment styles and great performance track records.
I also have positions in a number of growth stocks I like, including Hargreaves Lansdown (LON:HRGV) and Rightmove.
Cash Finally, I currently have a cash weighting of around 10% right now. This isn’t because I see cash as a good long-term investment, but because it provides me with options for the future. For example, if markets were to fall 20% in the next few months, I would have money on the sidelines ready to deploy. Keeping a little powder dry is always sensible, in my view.
So that’s how I’m invested within my ISAs right now. I’ll also point out that ISAs are only one part of my overall portfolio. I also have money invested within a SIPP, which has a similar asset allocation to my ISAs, as well as funds in a regular trading account for short-term trades. I’ve found that spreading my capital across multiple investment vehicles provides me with more flexibility.
Edward Sheldon owns shares in Unilever, Royal Dutch Shell, Legal & General Group (LON:LGEN), Rightmove, Ds Smith, Hargreaves Lansdown, City of London Investment Trust and Murray Income Trust. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended DS Smith, Hargreaves Lansdown, Prudential, and Rightmove. 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.
Motley Fool UK 2019