Here are my top stocks to buy now for my 2021 Stocks and Shares ISA

Jonathan Smith runs through his favoured growth and dividend stock picks that he could buy for his Stocks and Shares ISA this year.

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The Stocks and Shares ISA is a great investment vehicle enabled by the government. It allows me to build up a pot of investments within a specific account that is free from capital gains tax. This tax would normally be charged when I fill out my tax return each year. However, due to my ISA, I can buy and sell without needing to worry myself about it. With the new ISA year having begun in April, here are the stocks I’m looking at for my 2021 allocation.

Growth stocks

Each year, I want to allocate a good proportion of my Stocks and Shares ISA amount to growth stocks. This is because I’m still relatively young (cue the old man jokes) and so I’m ok to take on higher risk. Usually, growth stocks have higher volatility than others, but I’ve got a long enough time horizon to deal with this. 

For this year, I’m looking to buy growth companies that could take advantage of the reopening economy. These include Watches of Switzerland, Grainger and Greggs. I think a mix of all three allows me to get good exposure to the key areas I feel could perform well.

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It’s not guaranteed, of course and they could perform worse than I expect. That said, rebounding retail spending and sales should aid watch and luxury purchases. A return to the workplace for some should provide a boost for a bakers like Greggs. Finally, higher rental demand for properties as people start to mobilise again should aid Grainger.

Dividend stocks

Aside from trying to make gains for my Stocks and Shares ISA through capital appreciation, I also want to look towards dividend payouts. This helps to balance out my overall investment pot. If my growth stocks underperform for some reason, then I’ll be able to fall back on the income I’m getting from the dividend stocks.

Although I want to target yields above the FTSE 100 index average, I want to stick to names that I’m comfortable with. To this end I’d look to buy National Grid, SSE and Legal & General. In my opinion, these companies are sustainable dividend payers, and shouldn’t give me a lot of headaches from having to sell and find other dividend stocks in the near future.

The above examples offer a dividend yield currently between 5% and 6%. I’m happy at this level, and so would look to invest regularly to build up exposure here. Obviously, the yield changes as the stock price fluctuates. So one potential risk here is that over the next year of populating my Stocks and Shares ISA, the dividend yield could fall.

Opportunities for my Stocks and Shares ISA

Based on the above, there are lots of opportunities for me to target. Unless I have a lump sum of £20,000 ready to go, I’ll be looking to invest regularly each month to ensure I maximise my allocation by April 2022. I don’t see this as a bad thing, as over the course of the year there might be fresh growth or dividend stocks for me to buy.

Like buying £1 for 31p

This seems ridiculous, but we almost never see shares looking this cheap. Yet this Share Advisor pick has a price/book ratio of 0.31. In plain English, this means that investors effectively get in on a business that holds £1 of assets for every 31p they invest!

Of course, this is the stock market where money is always at risk — these valuations can change and there are no guarantees. But some risks are a LOT more interesting than others, and at The Motley Fool we believe this company is amongst them.

What’s more, it currently boasts a stellar dividend yield of around 10%, and right now it’s possible for investors to jump aboard at near-historic lows. Want to get the name for yourself?

See the full investment case

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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