How to grow a portfolio from scratch in a UK ISA

Hello all. I’m new to the game but I’m on board with the Foolish strategy and keen to start building.

I wanted to ask for tips/advice and how to building a portfolio and get an idea for my roadmap over the next year or two as I build out my holdings.

I’ve started with a UK Stocks and Shares ISA (with the intention of avoiding capital gains tax). However the rules around this are that fractional shares are not allowed, I have to buy whole shares. I am starting out with just a few hundred pounds, and don’t have large amounts of disposable income to add each month, though I will grow it.

I get the target of ultimately having 25+ stocks and likely having them at generally a single digit percentage position. However my current position I could buy, for example, 1 MSFT and have some change, but that’s not exactly diversified. I’ve started by buying into a small number of ETFs and some cheaper stocks to start with.

Would you focus on getting breadth before worrying about balanced positions? How important is it to have that balance early on? Would you focus on ETFs over stocks till the portfolio as it is gets larger? Or any other ideas are much appreciated, as I say I want to plan for the long haul. Thanks for your thoughts!

Welcome Lukethefool. We’re glad you could join us.

Its difficult for us to advise you as we don’t know the rules in UK. TMF used to have a UK operation but I think it folded some years ago. We also had a board on international investing. It’s gone too. Because of concerns about money laundering, the rules are strict and most US investment companies won’t do business with a Brit. That being said, here are a few thoughts.

Yes, for small sums and integer share investments diversification is a problem. Most would begin with an S&P 500 Index Fund for diversification. There are a bunch of them both ETFs and mutual funds. Not sure what is available in UK. SPY is the best known etf. Most major companies like Vanguard and Fidelity have index mutual funds.

In the US we often buy foreign stocks as derivatives. A bank or financial institution buys the shares in the foreign company and holds them in a trust. Shares in the trust are then traded on US stock markets. Something similar may be available to you. If in doubt, major international banks can probably assist you.

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Thanks. There is indeed www.fool.co.uk but I decided that .com was probably where more action was even if it meant I wouldn’t get such regional specific information.

As I’ve investigated more it seems there are lots of UK based ETFs that track US indexes. The rules here mean that ETFs must have a KID document and conform to UCITS rules (which I tihnk basically means that an ETF has a max holding of 10% of any given stock).

I’m using Freetrade which lets me purchase some US stocks, on which I pay tax on any dividends but am protected by the ISA from capital gains tax.

So oto start I’ve taken positions in these ETFs:
SMGB (US Semi conductors)
GPSA (US ESG)
MAGG (ESG Growth)
DXJP (Japanese equity)
ESIN (European industrials)

Other than that I’ve gone for a number of stocks that are cheaper - I might not be able to pick up NVDA yet but a SHOP here and a CHEWY there will help me grow. It might limit some opportunities for now but I can always review that as part of a rebalancing review down the line.