Loading up this year’s Stocks and Shares ISA? 5 costly mistakes to avoid as markets fall

Many investors will be using the Easter break to decide which companies to buy for this year’s Stocks and Shares ISA contribution limit. 

But it’s not quite as easy as picking a favourite share and pressing the Buy button. Mistakes can prove expensive. Here are five to avoid this ISA season.

1. Being deterred by stock market volatility

It’s easy to be spooked by the current mood, as Donald Trump’s tariffs spread uncertainty. But from a long-term perspective, market dips are usually the best time to invest.

Shares are cheaper than they were, and dividends more generous. Buying when confidence is low isn’t easy though. It’s in our nature to follow the herd, whatever some contrarians claim, but in the longer run it can pay off.

2. Thinking all cheap shares offer real value

There’s nothing more tempting than a bargain-bin stock. I’ve made some of my best investments buying after a big fall, but also a few of my worst.

A high yield and low price-to-earnings ratio might signal opportunity, or they might signal trouble. If a business is struggling with falling profits or rising debts, it could look good ‘value’ but could also be a trap. Dig a little deeper before considering any purchase.

3. Delaying that first move

Every year, thousands of investors wait until the final weeks of the year to invest part or all of their their ISA ‘allowance’. But those who move early get an extra 12 months of tax-free income and growth.

Personally, I aim to crack on as soon as the new tax year opens in April. And the biggest mistake of all? Not investing at all and letting the ability to invest up to £20k tax-free go to waste.

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.

4. Selling ISA investments too soon

Selling up during a downturn might offer temporary relief, but comes at a price. Losses on paper get locked in, and if the market recovers that money is no longer in play.

Stocks and Shares ISA money should be viewed as long-term capital. The power of compounding over time is what really does the heavy lifting, not jumping in and out. Keep a cash reserve for short-term spending.

5. Doubling down without realising it.

It’s easy to get drawn into a particular sector without meaning to, especially with so many tempting FTSE 100 names in financial services.

Take insurer Aviva (LSE: AV). Its shares are up 15% over the past year and a huge 122% over five. Recent results impressed, with operating profit jumping 20% to £1.77bn and the dividend hiked 7% to 35.7p. Assets under management climbed 17% to £198bn, while Solvency II own funds generation rose 18% to £1.5bn.

There’s plenty to like here, and even after the rise, the stock still trades at a reasonable 22 times earnings. Plus it has a juicy trailing yield of 6.78%, on top of any capital growth.

But Aviva isn’t without risks. It operates in a mature and highly competitive market, and growth is likely to be steady rather than spectacular. Its shares spent years going nowhere before the recent revival.

Also, anyone already holding FTSE financials like M&G, Legal & General, Phoenix Group Holdings, aberdeen group or Just Group might have more exposure to the sector than they realise. Balance is key. Even strong stocks can disappoint if a whole sector stumbles.