Let’s face it — 2022 was a shocker for most investors. Personally, I’m a lot more positive about 2023. In fact, I’m looking for ways to double the value of my Stocks and Shares ISA.
My ISA strategy
The first step is to divert any spare cash I have to this account. This is assuming I already have an emergency fund in place just in case 2023 throws up anything nasty.
Second, I need to make the most of my ISA allowance. Until April 5, I can put up to £20,000 in the account. From April 6, a brand new year to potentially put £20,000 in my ISA begins.
Obviously, I don’t have a spare £40,000 under the sofa. I doubt many of us do. However, the key is to take advantage of tax-free savings as much as possible. After all, any profits I make on assets held in this account are free of capital gains tax.
Now we get to the more interesting step.
Buying quality…on the cheap
Let me speak plainly: 2023 could go down as a once-in-a-decade opportunity to buy great stocks at relatively low prices.
Right now, I’m particularly attracted by UK housebuilders, most of which have seen their valuations solidly whacked by the now-notorious mini-budget, rising interest rates and the cost-of-living crisis.
Does this mean the demand for affordable new housing has gone for good? Of course not! What’s more, these companies are in a far more stable place financially than they were back in 2007. This should mean I’ll still be in line to receive dividends. These can then be reinvested and bring me even closer to my goal.
I’ve also been shovelling as much cash as I can into battered investment trust Scottish Mortgage. Its share price remains under the cosh due to investors’ new-found aversion to what were once high-growth businesses. Again, I’m confident their slowdown is only temporary.
Staying grounded
There’s just one caveat to all this. Having the objective of doubling the value of my Stocks and Shares ISA isn’t overly ambitious in my eyes. Doing so in a single year most definitely is.
Let me clarify: 2023 is my opportunity to build a portfolio that eventually doubles. In other words, I’m separating the actions I need to take from the result I want.
Theoretically, I could double the value of my portfolio in 2023 if 1) we get the mother of all recoveries and 2) I back the right stocks (and only the right stocks). The chances of this happening, however, are tiny.
So, how long is realistic?
While share prices could have further to fall if we get a deep recession, it seems to me that a lot of negativity is already priced in. And the time to buy isn’t when things are going well, it’s when most people are reluctant to do so.
As a guide, I’m trying to double the value of my Stocks and Shares ISA within five years. That’s still optimistic (equivalent to roughly a 15% annual return). But it’s not impossible. Indeed, it arguably becomes more realistic every time I put money to work in what I believe are undervalued stocks.
Feel free to engage in a bit of schadenfreude in 2028 if things don’t go well for me!
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
