Guaranteed gains and limited losses: here’s my Stocks and Shares ISA plan for 2026-27
Iâve been thinking about my Stocks and Shares ISA for the upcoming financial year. And Iâve made a bold decision.
For the year ahead, I intend to sell my investments and stay in cash. Instead of dividends, Iâm going to earn interest.
The problem with stocks
Investors give three main reasons for preferring stocks to cash. They are as follows:
- Stocks do better over the long term.
- Stocks generate passive income.
- Stocks provide protection from inflation.
Ok. Try telling any of that to Diageo (LSE:DGE) shareholders.
A £10,000 investment in Diageo shares from 10 years ago is now worth £7,385. If thatâs not long term, I donât know what is.
The point about passive income is also wrong. Some stocks pay dividends to shareholders, but donât forget where that comes from. It comes out of the companyâs cash. And if the shareholders own the business, the cash was theirs in the first place.Â
Diageo shares also show there is no protection from inflation. In fact, inflation is a big reason why the stock has done so badly.
Cash is king
Investing in the stock market might have made sense when I was born (in 1988). But things were different back then. Interest rates were nearly 12%, which meant there was only one direction they could go â down. And that was always going to be good for share prices.
Today, though, things are different. Interest rates are at 3.75% and there isnât much scope for them to go lower.
That means thereâs a real risk that share prices might fall. Investors canât just ignore this, no matter how much they might like to.
Cash, on the other hand, only goes up and if interest rates rise, itâll go up even faster. So Iâm going to transfer my Stocks and Shares ISA to a cash one.
April Fools!
Did I get you? I almost got myself for a moment there…
Iâm not selling out of my Stocks and Shares ISA and I donât think cash is a better long-term bet. But whatâs wrong with the arguments I made above?
In the case of Diageo, the stock has faltered for two reasons. One is that it was trading at a price-to-earnings (P/E) ratio of 24 a decade ago.
That didnât leave much room for things to go wrong. So when the business came up against challenges â even temporary ones â the share price crashed.
The story with stocks collectively, though, has been quite different. The FTSE 100 has outperformed cash by a long way over the last decade.
Itâs true that dividends only return cash to investors. But what I said above ignores the fact that really good businesses are really good cash generators. Diageoâs brands give it the ability to make products at one price and sell them at higher ones. And that does generate cash.
Inflation remains a risk. But cash doesn’t get around that issue, even if interest rates do go higher.
2026-27
Itâs a fair point that share prices are unpredictable in the short term. That means nobody â including me â should be investing cash they think they might need to draw on before retirement.
Beyond that, though, getting money into my Stocks and Shares ISA is my priority for 2026-27. And Diageo is one name among many that Iâm thinking about.
The post Guaranteed gains and limited losses: here’s my Stocks and Shares ISA plan for 2026-27 appeared first on The Motley Fool UK.
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Stephen Wright has positions in Diageo Plc. The Motley Fool UK has recommended Diageo Plc. 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.
