I regularly invest in a Stocks and Shares ISA with an aim to grow my pot as large as I can. Hopefully, even to £1m one day.
This won’t happen overnight though. Investing in shares should be seen as a long-term endeavour, in my opinion.
There are a number of reasons why that might be the case.
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Long-term investing
In the short term, stock prices are affected by investor psychology, government policy, and economic or geopolitical factors.
Share prices swing between variations of optimism and pessimism.
Fear and uncertainty regarding economic prospects can push stock prices lower. And enthusiasm and excitement can propel shares higher.
But that’s why I prefer to look through this short-term behaviour and focus on the long term.
Diversified Stocks and Shares ISA
When looking at which shares to add to my Stocks and Shares ISA, I look for a diversified group across several industries.
That offers benefits like reducing risk. By investing in several sectors, I prefer to avoid putting all my eggs in one basket.
Some industry groups like housebuilders are cyclical. These tend to follow the economic cycles of expansion and recession.
But others like pharmaceuticals are defensive, and these products are bought regardless of the economic cycle.
Quality businesses
For 2023, I want to continue to own high-quality businesses. By this I mean those that display double-digit profit margins and high return on capital employed.
I’d also look for what Warren Buffett famously calls a moat. These are sustainable competitive advantages. For instance, it could be a strong brand, patent, or superior technology.
There are plenty of UK shares that meet my criteria.
2023 top pick
If I had some spare funds, here’s what I’d add to my Stocks and Shares ISA.
Games Workshop (LSE:GAW) is an excellent business, in my opinion. It owns the intellectual property to its popular fantasy game Warhammer 40,000. Their fantasy miniatures are sold in physical stores and online.
But what excites me even more right now is a deal it recently announced with tech giant Amazon to develop its characters and stories into movie and TV productions. This could be a step change for the business, in my opinion.
It strikes me as a well-managed and highly profitable company. It also benefits from a strong balance sheet.
I’d bear in mind that parts of the business can involve discretionary spending. And in a recession, if customers tighten their belts, sales could slow.
Its share price has fallen by 9% over the past year, but I’ll still be adding it to my ISA soon.
The list
Although Games Workshop is one of my top stocks for 2023, there are many others that I’d buy too. These include pharmaceutical giant AstraZeneca, oil behemoth BP, and credit information company Experian.
These shares are diversified across several sectors and offer a mix of defensive and cyclical companies.
