Today, I’ve handed over the reins to Andy Ross from The Income Investor. Andy is an experienced investor. He is going to explain how to rebuild a Stocks & Shares ISA after buying your first home.
Buying a house. What a palaver. Raising a deposit, house viewings, uncontactable conveyancers who only deal in legal double speak, it’s a wonder anyone bothers buying a house. If it wasn’t for the spectacular rise in house prices over the last two generation or so, I doubt many people would bother.
Anyway, after around a decade of investing I managed to buy a house in 2021. Yippee. The downside? A massive hole in my finances and plans towards financial independence. This is how I rebuilt my Stocks & Shares ISA after buying a house.
But this isn’t really about me, I’m sharing my story about rebuilding my Stocks and Shares ISA to try and inspire other young people.
Little by Little
In the words of Oasis, little by little (great song by the way!), is the way to go when it comes to investing. By investing little and often it’s much easier to get into a savings habit. What I’ve done is typically added money to my ISA throughout the month, as and when I feel confident I won’t run out of money.
An emergency fund of course is a practical way of having confidence that even if too much money goes into an ISA, the expense of going overdrawn can be avoided. That’s why it’s so important to have an emergency fund. It’s also essential to have a money mindset and a focus on your finances if you are to build a Stocks & Shares ISA that will go up in value over time.
After more than halving the value of my Stocks & Shares ISA to get on the property ladder and feeling like I had taken a massive step backwards, I can confidently say that investing little by little has got me back on track.
Have a plan
You must have a plan to rebuild your Stocks and Shares ISA.
While saving little by little itself is ad hoc, it should fit into an overall vision of what needs to be achieved and what steps can be taken to get to the goal. Having a financial plan is crucial.
It’s amazing how much goal setting can help anyone achieve more, in any walk of life, not just when it comes to financial planning and attaining financial freedom. Remember, goals should be specific, measurable, achievable, realistic and time-based – SMART.
I’m convinced setting myself a goal for the year-end drove me on to save more money. In turn this has helped me rebuild my Stocks & Shares ISA faster than I imagined immediately after I paid for my house.
The bottom line is: have a plan for saving money into an ISA, or whatever savings vehicle you want to use; and then understand how you want to earn a return on that money.
I personally choose investing in individual shares, as well as some funds, trusts and one global tracker. But there is no right or wrong way and everyone’s circumstances and risk appetite is different.
I’m a big advocate of stock market investing. As many readers of this blog will no doubt already be well aware, inflation erodes the value of cash.
It seems to me investing in an asset(s) that can appreciate in value and/or produce additional income is a good way to go to lessen the impact of inflation. Dividend paying shares are my favoured way of trying to grow my wealth. I use a Stocks & Shares ISA to do this.
I think my Stocks & Shares ISA is back on track because my portfolio of stock market investments is diversified. For those interested these were the holdings at the time of my last update.
Investing in say only US tech stocks strikes me as very risky. Having some of course is probably fine because these types of shares have done well, particularly in recent years, but the point is sentiment in the stock market can change – as it is right now.
I’m confident that having a diversified portfolio has helped me rebuild my ISA and protect against the value of my money falling too much.
Alongside effective investing, either passive or active, the other key to getting and feeling wealthier is to control expenditure. It’s an unavoidable fact that if you earn £100 but spend £110 every single month you are getting poorer. It won’t be long before you find yourself in debt.
The only sustainable way I know how to rebuild a Stocks & Shares ISA that will increase in value is to have control of your expenses. This discipline then means little by little more earnings can be tucked away into the ISA. It can then hopefully be invested in a way that creates a snowball effect of growing wealth.
As an aside, if you’ve never heard of compounding – check it out. Understanding compounding is very important in my opinion.
Financially life is tough for young people; there’s no doubt about that. I hope this post can help inspire others to build wealth. That’s why this blog is so important for young people and a great resource.
There you have it. That’s my story and my advice for rebuilding your Stocks and Shares ISA. I hope it has inspired and helped you to do the same.
Andy Ross can be found on Twitter @rostow101 and his blog The Income Investor