As a fully-signed-up Fool, I’m aware that the Stocks and Shares ISA deadline is fast-approaching. It’s not the only thing I’m reminding myself about investing via this tax-efficient account.
1: Once it’s gone, it’s gone
Note to self: the £20,000 annual ISA allowance doesn’t carry over. In other words, I won’t be able to put £40,000 in during the next tax year if I decide not to make any contributions in the 2021/21 tax year. As such, I’ll be cramming as much cash into this account as possible before 5 April.
Clearly, there’s no obligation to actually invest this money before the ISA deadline. However, with markets in a funk for a variety of reasons, I think putting my money to work sooner rather than later will really pay off.
2: What’s boring/unknown can be profitable
Just because the deadline is approaching does not mean I should buy what’s flavour of the month. In fact, many of my better buys have been those that rarely attract fanfare. To be brutally honest, some of them are rather boring. Examples include laser equipment manufacturer Somero Enterprises and kettle safety control supplier Strix. Sexy? No. Profitable? Oh yes!
Both of the above also return dividends to their owners that I always reinvest back into the market, allowing me to take greater advantage of compound interest.
3: Know what I can control
I used to curse the market for daring to go against my wishes. My Foolish training taught me to react differently.
The fact is, the market simply doesn’t care what I think. Nor do the shares I own know that I own them. This might seem obvious but it’s very easy to become too attached to an outcome rather than striving to improve the process of stock selection. While the latter still can’t guarantee success, how I choose stocks definitely is within my control!
What’s far more important to me is owning slices of quality companies – just like star UK fund manager Terry Smith. Thankfully, there’s no shortage of good businesses out there, unlike the number of days left before the ISA deadline elapses.
4: Time matters more than timing
Like most investors, I’d love to be able to predict exactly where markets (or the share prices of individual stocks) will go next. Knowing I can’t ever do this, at least consistently, is actually one of the most important learning points for me over the years. It also makes a huge difference to how I assess the performance of my Stocks and Shares ISA.
This is why I never ruminate over my timing or how my account is doing from annual deadline to annual deadline. Whether I buy stocks before or after 5 April, the only number that truly matters is the one showing when I close the account for good.
5: Learn to walk away
Cards firmly on the table: I used to be a compulsive portfolio-checker. Thankfully, I’ve realised that this habit doesn’t serve me in any way. Rather, it increases the risk that I’ll do something impulsive/stupid.
Understanding when to close the laptop and physically step away from the market, while remaining invested, is fundamental. This is especially the case when operating an ISA since any money I withdraw but then reinvest will count towards that £20,000 allowance.
