Is this the best time to invest in a stocks and shares ISA – or the worst?

The deadline of 5 April to use this year’s Stocks and Shares ISA allowance is fast approaching. There are only three weeks left.

For investors with cash to spare, using the £20,000 allowance is generally not sensible. Every penny invested is exempt from capital gains tax, dividend tax, and lifetime income tax. But it’s understandable that many are feeling scared right now. Who wants to invest in the stock market while drones and missiles are rocking the Middle East?

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It certainly takes strong senses but there are easy compromises. Most ISA platforms allow investors to use their money without investing immediately. They can simply leave the money sitting in cash within an ISA platform trading account, waiting for cooler conditions before buying shares.

Time to invest

That’s a useful option for anyone wary of jumping into the market right now. In The Motley Foolhowever, we have a different opinion. In general, we see a market dip as a good time to buy stocks, as valuations are usually lower and dividend yields higher. Waiting for a trend to pass can easily backfire, because by the time the trend ends, many stocks have already moved back.

So, yes, it’s a good time, but there are risks. Unless the Iran conflict winds down quickly, stocks could fall further. No one knows what will happen. So my strategy is simple. First, use the ISA grant before the deadline. Second, start feeding money gradually into stocks, using the opportunity to enter the markets. But keep some money in case the prices drop too much.

Investors also need a reality check. Timing the bottom of the market is almost impossible. Perfection cannot be achieved.

One more thing. In our view, investors should only buy stocks with the intention of holding them for at least five years. That enables them to recover from short-term shocks and allows earnings and share prices to consolidate. Markets are always volatile, however history shows that they recover when the outlook is clear.

Is Barratt Redrow profitable?

The big question is which stocks to buy. FTSE 100– it’s on the list EasyJet, Persimmon, Diageoagain Hikma Pharmaceuticals all are down more than 20% in the past month. A house builder Barratt Redrow (LSE: BTRW) is down 27%.

The war didn’t help sentiment, but the construction industry was already struggling. Housebuilders have endured years of headwinds, including Brexit, the pandemic, rising inflation and mortgage rates, and the scrapping of the Help to Buy scheme. Investors were hoping that it will be free this year, as inflation is expected. Recent geopolitical upheavals have cast doubt on that.

Ironically, that’s also what makes Barratt Redrow so interesting. Shares now trade at a tentative price-to-earnings ratio of about 11, while the yield has risen to more than 6%.

It’s not an accident. If oil prices remain high, the UK economy could go into recession. Mortgage rates are already rising, adding to consumer caution. Liquidity in the market can help spread the risk, and I think this should be considered. Much more FTSE 100 stocks look tempting but, as always, buying with a long-term perspective is a good idea.