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Here’s where I’ll be investing my Stocks and Shares ISA in 2023

New year '2023' numbers on stacked wooden cubes
Image source: Getty Images

Stocks and Shares ISAs are terrific investment vehicles. One challenge associated with these products, however, is working out where to invest, because the options are vast.

Here, I’m going to reveal where I’ll be investing my Stocks and Shares ISA in 2023. This is where I’ll be putting my money to build wealth over the long term.

Growth stocks for strong long-term returns

Broadly speaking, I’ll be investing my ISA in three main areas in 2023.

The first area is large-cap growth stocks. Here, I’ll be investing in mega-cap tech stocks such as Apple, Alphabet, Microsoft, and Amazon, as well as smaller (but still large) growth companies such as computing power specialist Nvidia, and credit card giant Mastercard.

2022 wasn’t a great year for a lot of these stocks. With interest rates rising rapidly, investors moved out of growth stocks, pushing their share prices down. Their prices could stay lower for a while.

However, as a long-term investor with a 10-year-or-more time horizon, I’m convinced that these are the kinds of companies I want to be investing in. All are benefiting as the world becomes more digital and appear to have significant long-term growth potential. So, I’ll be buying more shares in 2023.

Dividend stocks for stability

The second area of the market I’ll be directing capital towards is dividend stocks. These are stocks that pay out a proportion of company profits, in cash, to investors on a regular basis.

Dividend stocks play a valuable role in my portfolio. Not only do they provide me with an additional source of return (which is handy when markets are choppy) but they also provide a degree of stability. Those that pay dividends are generally well-established, profitable companies.

Dividend stocks I own and plan to add to in 2023 include Diageo, Unilever, and Reckitt, which are all listed on the London Stock Exchange. Not one of these stocks offers particularly high yields, but they have good track records when it comes to dividend growth and their share prices are generally quite stable.

Small-caps for explosive returns

Finally, I’ll also be investing some money in smaller companies, or ‘small-cap’ stocks as they’re often called.

Investing in small-caps is a riskier approach to investing. Often, the share prices of small companies are quite volatile.

However, on the plus side, these stocks can produce explosive returns for investors. For example, one UK-listed small-cap stock I’ve invested in, Alpha Group, has seen its share price roughly quadruple over the last five years, turning a £2,000 investment into around £8,000.

Other small-cap stocks I own and plan to buy more of in 2023 include 5G-rollout beneficiary Calnex Solutions, fast-growing software company Cerillion, and electric vehicle charging plug manufacturer Volex.

But to minimise risk here, I’ll keep my positions relatively small.

The post Here’s where I’ll be investing my Stocks and Shares ISA in 2023 appeared first on The Motley Fool UK.

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Ed Sheldon has positions in Alpha FX, Alphabet, Amazon.com, Apple, Calnex Solutions Plc, Cerillion Plc, Diageo Plc, Mastercard, Microsoft, Nvidia, Reckitt Benckiser Group Plc, Unilever Plc, and Volex Plc. The Motley Fool UK has recommended Alpha FX, Alphabet, Amazon.com, Apple, Cerillion Plc, Diageo Plc, Mastercard, Microsoft, Nvidia, Reckitt Benckiser Group Plc, and Unilever Plc. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. 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 2022