Image source: Getty Images
Every April there is a flood of people who suddenly scramble to put money into a Stocks and Shares ISA before the annual deadline for contributions passes.
That deadline does not mean that the ISA needs to be invested – it just concerns the annual deadline for funds being contributed. But, inevitably, a lot of people turn their mind at that time to how to invest their ISA funds too.
Rather than wait, though, I am investing my Stocks and Shares ISA this summer.
Here’s why.
Valuations
Will there be a stock market crash in coming months or years?
Maybe — or maybe not.
I do think gathering storm clouds in the global economy could spell trouble for the markets. But trying to time a crash is a fool’s errand. Market timing is ultimately no more than speculation.
What I can do, however, is look at the current valuation of shares and ask whether I think they are a bargain relative to the long-term prospects of those firms.
Bargain hunting
At the moment, I think there are lots of attractive valuations in the UK stock market.
Take one of the shares I have added to my Stocks and Shares ISA in recent months as an example: Vodafone. With a dividend yield of 11% and price-to-earnings ratio of around 7, the shares look cheap to me.
Could Vodafone fall further and get even cheaper? Of course it could. All shares can always fall further, even if they have already fallen a lot (Vodafone has tumbled 60% in five years).
But remember – I am looking for value. If I think a share offers me great value today, I would add it to my ISA now rather than waiting and hoping to buy it even cheaper later on.
Time to think
Summer is often a quiet time in the stock market as many people are on holiday.
I think that summer holidays can be a useful break that give one time and space to reflect on investment opportunities. Thinking about emerging trends and changing customer demands can help to shape one’s views on what sorts of companies might prosper in the coming years – and beyond.
Making investment mistakes can be costly. Rushing to buy shares at a busy time of year can sometimes make such mistakes more likely.
By contrast, putting aside spare time in the dog days of August to research properly and carefully consider what sorts of businesses offer long-term value at their current prices could hopefully help me make better considered choices when it comes to adding new companies to my Stocks and Shares ISA, or selling existing holdings.
That is why I think right now is a smart time to invest spare cash in my ISA. I have time to research possible purchases – and see some very attractive valuations in the current market.