I’m frequently looking at how to invest fresh funds in my Stocks and Shares ISA. That’s particularly the case at the start of the New Year. It’s also when I often think about my investment strategy for the year.
I expect 2023 to be a tale of two halves. The first half of the year could be difficult as the economy slows sharply and higher interest rates take their toll on businesses and consumers.
During this period, I reckon defensive shares could perform relatively well. Companies that rely on discretionary spending like retailers and automakers could perform relatively worse.
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Bouncing back
The second half of the year has the potential to bounce back, in my opinion. If inflation falls substantially, central banks could reverse restrictive policy actions. That could lead to a rebound in the global economy and many worldwide shares.
I reckon the shares that suffer during the first half of the year could potentially outperform during the latter half of the year.
That said, trying to time when certain groups of shares might perform best is difficult and unreliable. Instead, I prefer to use a strategy that ignores short-term noise.
That’s why in 2023, I’ll continue to implement my long-term investment strategy that has withstood the test of time.
Stocks and Shares ISA criteria
Let’s explore this further. To invest a fresh £10,000 in a Stocks and Shares ISA, I’d pick a small selection of high-quality shares. These top picks should offer characteristics like profitability, earnings growth, and strong balance sheets.
Overall, in my ISA I prefer to own no more than around 20 companies. That should be ample to achieve diversification benefits. That means if a crisis strikes one of my shares, my overall portfolio will still survive.
If I concentrated my money in just one or two picks, it could be catastrophic to my ISA if something terrible happened to one of them.
Next, I’d look for some characteristics that can’t easily be measured but can often be observed. For instance, popular investor Warren Buffett often talks about the need of a moat.
By this he means a sustainable competitive advantage like a strong brand, patent or superior technology. The best companies often display wide moats and that’s what I’d like to feature heavily in my ISA.
Lastly, I’d look at the best shares available in the UK and US. The FTSE 100, FTSE 250, and S&P 500 are all home to many excellent shares. To spread across geographies, I’d pick a selection from all these major indexes.
Which shares?
Some shares that meet my criteria include Games Workshop, Howden Joinery, Experian, Diageo, Apple, and Alphabet.
These six shares are spread across several sectors. But they all display wide moats, high levels of profitability and strong balance sheets. All are phenomenal businesses, in my opinion.
That said, how these shares perform over the coming months is uncertain. There is still much uncertainty that could limit their performance in the short term. But one thing is for sure. And that’s my confidence in their ability to weather any storms.
That’s why if I had some extra funds, I’d happily buy all six of these shares today.
