I’m a big fan of the Stocks and Shares ISA as it offers a tax-efficient vehicle for my investment. The account lets me invest free from capital gains and income tax.
Like many investors, I’ve seen the value of my Stocks and Shares ISA decrease over the past year. The market is down and there has been very few safe havens, with the exception of commodities.
So, here’s why my portfolio is down, and what I’m doing about it.
Challenge investment climate
Unless my portfolio was entirely weighted towards the commodities sector, I’d probably have lost money this year. The FTSE 100 is down around 3% in 2022 — largely propped up by oil and mining companies — and the FTSE 250 is down 19%. The FTSE 100 is up 5% over 12 months while the FTSE 250 is down 12%.
I moved away from the commodity sector earlier in the year, assuming that a slowdown in China would impact demand and therefore the sector’s performance. But, I was wrong and missed some growth opportunities, although I still expect demand to wane further this year.
The performance of the FTSE 250 is more representative of the UK economy, and the non-commodity sector. As such, I’m actually pretty happy to be down only 5% this year.
The Nasdaq is down 26% in 2022 (down 19% over 12 months), but thankfully I had very little exposure here. Growth stocks were looking very expensive in 2021 and I kept clear.
So what am I doing?
Mostly, I’m sticking with my strategy, but I’m also on the lookout for opportunities in the current environment. It can be tempting to sell when I see red across the portfolio. But I’m keeping stocks I believe in.
Sticking with value: My portfolio is heavily weighted toward value stocks such as Lloyds, Barclays, Persimmon and Legal & General. These stocks can be slightly cyclical, but in the long run, I think these shares will perform well as the British economy recovers from the pandemic and we move away from the Brexit transition. Despite these stocks all being down in 2022, I’m not selling.
Finding buying opportunities: Having said this, I will sell certain stocks when I think there are better options out there. This provides me with the capital to follow opportunities and buy stocks that I think have greater long-term potential.
So, I’m looking at stocks that I think have considerable upside in their share price having fallen during the pandemic. Rolls-Royce, now trading for 92p, down from highs near 300p before the pandemic, looks like a great addition to my portfolio if it can successfully manage its debt pile. It’s up 1% over 12 months.
I also recently bought NIO stock. The Chinese EV maker dipped to $13 a share in May, but is now back at $20. I had stayed away from growth stocks last year, but the collapse created opportunities and this was one I was happy to take. NIO is down 54% over 12 months.
It’s not rocket science, but by doing the above, I’m hoping to prepare my portfolio for the next bull run.
