Is now the time to open a Stocks and Shares ISA?

Both the FTSE 100 as well as S&P 500 they are close to their all-time high. So it's easy to see why investors might think now is not the time to start a Stocks and Dividends ISA.

I doubt this, however. And there are three reasons why starting an investment portfolio right now can be a great idea.

Waiting is dangerous

The first reason is that waiting for stock prices to fall is risky. Just because stocks have been going up doesn't mean they're about to go down.

In fact, I think there's good reason to believe it won't. Interest rates are falling in the UK and this looks set to boost prices for the time being.

The FTSE 100 is up 6.5% so far this year. If it does the same again in the next 12 months or so, it will take a 12% drop for prices to return to where they were in January.

I think it's going to take something big to move the index that way and I wouldn't be willing to bet on it happening. So waiting for a better opportunity seems risky to me.

Market highs do not produce good results

Another reason is that investing when the stock market is bullish is not always a bad idea. The FTSE 100 peaked in January 2020 before falling 33% in two months during the Covid-19 pandemic.

It would be a very unlucky time to invest before that kind of risk. But things went well for investors who bought stocks just before the pandemic.

First, the index is up 7% since then. On top of this, a 4% dividend means that someone who invested £1,000 in the FTSE 100 in January 2020 would have £1,250 today.

In other words, investing can still generate good returns even when the stock market is at its best. The key is to be able to stay invested for a long time and wait for a return.

The stock market

Finally, even when the overall stock market is expensive, there can still be individual stocks that are cheap. A good example is this B&M European Marketing (LSE:BME).

A stagnating economy in the UK may cause consumers to look for better alternatives. That's a risk with the company's focus on the discount strategy.

Despite this, the stock looks attractive compared to the FTSE 100. The index trades at a price-to-earnings (P/E) ratio of 15 and has a return on equity (ROE) ratio of 11%.

B&M European Value Retail return on equity 2014-24

Created in TradingView

In contrast, B&M shares trade at a low P/E and earn a high ROE. And this is not just a one-time payment – the business regularly earns returns on equity of over 11%.

Getting started with a Stocks and Shares ISA

The major indexes may be higher than they were at the beginning of the year, but I don't think that makes this a bad time to start investing. And the Stocks and Shares ISA is how I got started.

Whether by reference or by looking at certain opportunities, not paying tax on capital gains or dividends can be valuable in the long run. This is why I invest with an ISA.

Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice. Students are responsible for conducting their own due diligence and obtaining professional advice before making any investment decisions.