The countdown to the June 30 deadline to ask for a Brexit extension was an anti-climax. The UK had made it clear weeks ago that it wouldn’t ask for one. So with the deadline gone, we’ve got six months before the UK finishes the transition period and is truly out of the EU. Six months may sound like a long time, but it’s really not. So looking today at how to invest before Brexit via your ISA, to profit from the coming situation makes a lot of sense.
Avoid over-trading before Brexit
This is advisable generally, but also because of your ISA limit. The annual subscription limit for a Stocks and Shares ISA is £20,000. Now, if you sell stocks during this period and take the cash out of the ISA, that’s fine. But you can’t keep taking money out and putting money in, as you’ll hit the £20,000 limit just by putting the same money back in again. Given that the ISA is there as a tax wrapper to shield your profits from capital gains tax, wasting some of the subscription limit by moving in and out all the time doesn’t make sense.
From an investing point of view, I’d also be steering away from trying to trade excessively in this market. In the next six months, we’ll undoubtedly have news which will cause the FTSE 100 to swing around. By all means have a strategy to buy on the dips, but trying to constantly time the market perfectly to both buy and sell in a short period is almost impossible. Investing in chunks for the longer term should put you in a much better position.
Split up the £2,000
If I had the £2,000, my first action would be to think of it as four lots of £500. I’d be looking to invest one lot now, and then look to deploy the other three chunks over the coming six months. I feel this would give me a much better opportunity to buy into good FTSE 100 firms at an average price I’ll be happy with in the long term.
Given that the FTSE 100 is still heavily down from where it started the year due to the stock market crash in March, I’d be buying a FTSE 100 tracker with my first £500. For me, buying the FTSE 100 index at around 6,000 points is a great way to go. Next, I’d make a list of stocks I like. Take a look at The Motley Fool UK team’s favourite stocks for July here. There are plenty of good examples of firms I think are worth buying.
Consider buying £500 worth of the stock you like in coming weeks. Or split the £500 into five different firms you like. From here, I’d save the remaining £1,000 for Brexit-related opportunities in the coming months. Deals struck for certain sectors (like fishing or finance) could provide a good reason to buy. Or a market-wide sell-off could mean buying an oversold firm on the dip. That’s smart Brexit investing.
The bottom line is that six months will fly by. So by having your strategy and ideas in your head now (and taking some action) you can be poised to take advantage of whatever happens.
The post Six months to Brexit! Here’s how I’d invest £2,000 in my ISA right now appeared first on The Motley Fool UK.
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Jonathan Smith and The Motley Fool UK have no position in any of the shares mentioned. 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.
Motley Fool UK 2020