Adhering to standard professional investment advice and use of a Stockopedia stockranks strategy is in my view very sensible; own around 20 stocks in different sectors/industries that are of high quality. Review periodically and cull poor performers (and possibly profit warners).

However, I think that there is another aspect to investing in stocks that is also important. Namely, what types of stocks are held (eg growth vs income) and where they held.

Obviously the first port of call for holding stocks is a low cost ISA and/or SIPP. For those who are fortunate to have more to invest than their annual ISA/SIPP allowance a dealing account will be required. I think it is important to use this account effectively and to focus on 2 aspects.

1 Place stocks in your dealing account that are likely to generate a capital gain and realise the tax free gain each year (circa £11,000). Swap holdings between husband and wife if necessary.

2 Place low or zero income stocks in the dealing account and high dividend shares in the ISA account. (for example IQE in a dealing account and RDSB in an ISA). The governments current generous (£5000) tax free dividend allowance will not last.

As the market goes up and down long term strategies are important. Remembering that over very long term periods (a decade or more) the average value of stocks will either increase or remain static, but not fall. This suggests the following portfolio strategy;

High dividend FTSE100 (or FTSE350) shares have a low risk of total loss. A dividend of over 5% and in many cases overseas earnings protect against significant losses and fluctuations in the pound If the shares are held long-term particularly if they are bought in a drip feed fashion. This type of stock can be held very long term and this reduces dealing costs. The income generated is comforting during periods when the value of the stock declines In bear markets.

However, the greatest capital gains tend to be in the smaller companies. Therefore a balanced portfolio should include such stocks unless you are very risk averse. An additional advantage of AIM investments is the lower dealing cost. This is particularly the case as the need to trade will be greater in the lower capitalised companies as they fluctuate…

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