How I’m targeting financial freedom with a Stocks and Shares ISA

I make no bones about it, I invest in a Stocks and Shares ISA for the financial freedom it can give me. If I can use it to build an income stream outside of my job, it might let me choose less stressful work or cut down on my working hours. One day, I hope to have the option to retire early. 

One of the biggest obstacles to achieving these goals is, oddly, to do with emotion. There are simple traps that are easy to fall into but can wreck a lifetime of saving and investing. Let me explain.

First, I look to invest sensibly. Or in other words, to look for the steady return that builds up to huge sums over time, rather than the ‘get rich quick’ way of making money. 

I’ll confess that I’m as bad as anyone when I see a few big numbers. Crypto is a good example. I’ll read a news article about some bloke who made millions from Bitcoin then waste the afternoon searching for the next big thing. Crypto can yield rewards. But sometimes it turns out to be a coin like Luna, which ends up at zero and investors lose all their money.

While stocks go down too, the markets have a fabulous track record of making money. Stocks generate around 10% a year going back decades. 

I can limit risk, and get closer to this average, by diversifying my Stocks and Shares ISA. The more companies, the better. I can even invest in an index fund, which is like investing in an entire market at once. 

Get rich slowly

Fun fact: anyone who invested in a FTSE 100 index fund at any time before 2023 (and didn’t sell) has made money. Anyone who held since its inception in 1984 has made 20 times the return on their investment. Maybe that’s not getting rich quick, but I’d take getting rich slowly any day.

That said, I experienced a wobble three years ago when I watched my net worth fall by 30% in the early weeks of Covid. My heart sank more than a couple of times, and it did cross my mind to sell to avoid further losses.

In the end, I chose to stay the course and not panic-sell. This worked out brilliantly. The markets recovered in about a year and have kept making me money since then. A similar recovery happened after the Great Recession in 2008 and every single market crash or correction before that too.

Counterintuitively, when stocks are down, this is the best time to invest. If the underlying business hasn’t changed then it’s like the stocks are on sale. Buy low, and I can get even better returns. 

Best year for stocks

The best year for stocks in the UK in the last 25 years? It was in 2010, right after the recession. And in 2023, with the FTSE sliding, it’s another great time to be buying into bargain UK stocks, I feel. I’m continuing to add to my Stocks and Shares ISA, despite the market conditions.

It’s not easy to ignore the latest ‘get rich quick’ share or the feeling of worry when stock markets go down. But if I can, I know I’ll be able to target the kind of income that will give me the financial freedom to let me live life on my terms.