My S&S ISA Strategy - am I being to simplistic?

djm1972

I've got around £3K that i'd rather do something more creative with than simply having it sat earning practically nothing in a savings account.

Basically, there are 3 big name companies that I have lots of experience of as a customer, that I feel are well run, have a straight forward product offering (and therefore a business model that I understand) and are in a reasonable position to weather the recession.

I'd like to invest in these companies; and initially thought of simply opening a nominee trading account somewhere, but then it occurred to me that I've not used this year's S&S ISA allowance. I am fully subscribed to this year's cash ISA allowance.

Taking a long term view - would it make sense to go down the S&S ISA route? I'm impressed with H-L and they're looking for a minimum 3K investment under normal circumstances (which is fair enough), and I have that amount to invest (I may as well use the full £3.6K), so would that be the way to go?

So if holding a S&S ISA of £3K in just 3 stocks isn't totally stupid (based on my criteria mentioned above - i'm not just investing in these companies blindly) should I just split the funds evenly; or is there some metric that I should be looking (share price, market cap. etc.) and use that to influence the distribution somehow?

Thanks!

EdGasket

Just because, as a customer, you think the business is well run, doesn't mean it is profitable or that the shares will rise. Take Jessops as an example, the shops and service are nice but the shares went bust last week ! TBH if you only have 3K, a S&S ISA does not offer any benefit over a normal non-ISA share-dealing account. This is because you are allowed to make over 9K a year tax-free in capital gains anyway outside an ISA and you are unlikely to do that on a 3K investment. So it would be best to just have a normal dealing account and maybe think about transferring this into an ISA if/when it has grown to around 10K in value.

fg22

If you're a higher rate taxpayer ISA's reduce the tax you pay on dividends

EdGasket

Yes that's true !

p00hsticks

djm1972 wrote: »

So if holding a S&S ISA of £3K in just 3 stocks isn't totally stupid (based on my criteria mentioned above - i'm not just investing in these companies blindly) should I just split the funds evenly; or is there some metric that I should be looking (share price, market cap. etc.) and use that to influence the distribution somehow?

IMHO, it's not really worth investing much less that £1000 on a single stock - anything smaller and the dealing charges when you buy and sell are going to take too big a percentage. So if it were down to me I'd split it evenly into three lots of £1000-£1200

Bear in mind that as well as the dealing charges (say £10 each buying, and another £10 each selling) you'll have to pay stamp duty when buying (0.5% of the transaction price, so around £15) and probably an annual charge to the broker if you're going down the self-select ISA route.

Unless you intend to build up your portfolio you might find it cheaper/more effective just to plump for one stock and buy it in certificated form to avoid the annual fees... As a previous poster has suggested, there is little need for a ISA wrapper unless you intend putting more in in subsequent years.