Using a Stocks and Shares ISA to build an investment portfolio can prove quite lucrative in the long run. After all, this special type of brokerage account completely eliminates taxes for British investors. But for those just starting out on their investing journey, building a portfolio can be quite daunting.
Yet, with as little as £50 a week, even novice investors can accrue a large nest egg. Let’s explore how.
Investors have a wide variety of choices when picking brokerage accounts. And this increased level of competition has worked wonders in bringing down commission fees. Today, it costs around £10 per transaction with an average discount rate of roughly £5, if a regular investment plan is used.
But this quickly highlights a problem. Assuming an investor can execute their trades at £5, a £50 investment would need to generate a minimum 10% return before things even break even. That’s why it’s best not to invest £50 a week, but rather let it accumulate into a more significant lump sum.
Waiting a month to invest £200 with a Stocks and Shares ISA reduces the break-even threshold to 2.5%. This not only means wealth is generated faster, but also less capital is gobbled up by commission charges.
To put things in perspective, investing every week in this scenario would result in £260 being paid to the broker in a single year. However, by investing every month instead, this bill drops to £60. That’s an extra £200 being put to work generating long-term wealth.
As we’ve seen in 2022, the stock market can be quite a volatile place. And while volatility is not entirely avoidable, diversification can diminish the effects.
By owning a wide range of high-quality enterprises, the impact on an investment portfolio, should one fail, can be significantly reduced. Therefore, an investor can allocate £200 each month to add a new top-notch business, steadily diversifying their portfolio over time.
While there is some debate, a diversified Stocks and Shares ISA usually contains at least 20 companies. But buying shares in a single business each month could take a while to reach this state. Fortunately, there is a shortcut.
As an alternative to picking individual stocks, investors can opt to buy shares in an index fund. Using this financial instrument, it’s possible to own a small piece of every business within the underlying index in a single transaction. And while annual management fees exist, index trackers are notoriously cheap.
The end result is an instantly diversified portfolio matching the stock market’s 8-10% historical performance without swallowing a massive trading commission bill.
Of course, index investing, just like stock picking, isn’t risk-free. Case in point, over the first 10 months of 2022, the FTSE 250 tumbled by nearly 30%!
Crashes and corrections are an inevitability on an investing journey. And they often send many portfolios into a tailspin. But, over the long run, the stock market has a perfect track record of recovery before reaching new highs.
Therefore, even within these frustrating and stressful periods of volatility, consistently drip-feeding capital into a Stocks and Shares ISA can lead to impressive long-term wealth… for patient investors.
The post Here’s how I’d invest £50 a week in a Stocks and Shares ISA in 2023 appeared first on The Motley Fool UK.
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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
White House Press Secretary Karine Jean-Pierre indicated that U.S. President Joe Biden has little sympathy for Ticketmaster's parent company Live Nation, which is reportedly facing an antitrust probe over the fiasco Taylor Swift fans faced in trying to snag seats for her upcoming Eras Tour.
Declining to comment on "any potential investigation" by the Justice Department, Jean-Pierre said Biden has been clear on how he feels about companies that hold monopolies.
"He's been crystal clear on this," Jean-Pierre said Friday. "And I quote: 'capitalism without competition isn't capitalism, it's exploitation.'"
Biden later tweeted that his administration was doing everything it could to cut so-called junk fees, including those charged to see a show over the holidays.
Ticketmaster, part of Live Nation, is facing scrutiny for its roll out of Taylor Swift concert tickets.
The CEO of Live Nation's biggest shareholder Liberty Media's Greg Maffei said the presale was only supposed to be open to around 1.5 verified Swifities but 14 million people, including bots, descended on the site for tickets. After the chaotic release this week, Ticketmaster announced it would not sell tickets for the "Eras" tour to the general public Friday as planned.
Demand for tickets to her tour was heightened by the recent release of her album "Midnights" and the fact that Swift has not toured since 2018. Her "Lover Fest" tour was canceled due to the pandemic. Swift criticized the roll out in an Instagram post.
"It's truly amazing that 2.4 million people got tickets, but it really pisses me off that a lot of them feel like they went through several bear attacks to get them," Swift wrote.
The New York Times reported Friday the Justice Department had opened an antitrust probe into Live Nation after the fiasco. The company has previously found itself under pressure from regulators for monopolistic practices. Live Nation Entertainment is a merger between Ticketmaster and Live Nation in 2010. It was approved by the Justice Department at the time but the company has been repeatedly accused of abusing market power by hiking ticket prices and adding arbitrary fees.
The Biden has been actively pushing for more competition across industries. DOJ recently blocked publisher Penguin Random House's purchase of Simon & Schuster. Two weeks ago the administration also announced plans to crack down on "junk fees."
Lawmakers too have called on the Justice Department to investigate the company.
"Daily reminder that Ticketmaster is a monopoly," Rep. Alexandria Ocasio-Cortez, D-N.Y., wrote in a Tweet Tuesday. "Its merger with LiveNation should never have been approved, and they need to be reigned in. Break them up."
Sen. Amy Klobuchar, D-Minn., chair of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights. Klobuchar sent a letter to Ticketmaster president and CEO Michael Rapino asking him to respond to questions about allegedly anti-competitive tactics by the company.