Is a SIPP different to an ISA or share trading account when it comes to finding the right shares to buy?

I think this can be a useful question because it helps crystallize your thoughts about what you are trying to achieve with SIPP.

Forced to think long term

As a proponent of long-term investing, I try to buy stocks that I intend to hold for the long term, regardless of the investment platform I apply.

However, there is a difference when it comes to investing in a SIPP. Unlike other investment platforms, for many investors their funds are effectively locked up for decades (depending on their age) due to the minimum age that must be met before withdrawing anything from a SIPP (and in a few years this age is expected to rise to 57).

However, this does not mean that the shares inside cannot be sold. They can be sold in the same way as an ISA or trading account.

But there is a difference. When life throws us an urgent need for cash, many people may consider selling shares in their ISA or trading account to raise funds. In a SIPP, as I explained above, funds are not available for withdrawal until a certain age.

In a way I see it as a positive thing. Without being able to withdraw money from it, a SIPP could really assist me as my aim is to be a long-term investor, which might otherwise be easier in theory than in practice.

Combining dividends can be profitable

As an example of what this might mean, imagine someone invests $1,000. pounds and adds 5% per year.

After 40 years it should be worth it 7 thousand pounds.

It did not require any work on the part of the investor. They simply buy shares in their SIPP and then sit back and let it grow over the coming decades.

Value creation can take many forms

On the other hand, investing PLN 1,000 pounds Nvidia (NASDAQ: NVDA) just five years ago, the holding’s value would have grown to almost $13,000. pounds as a result of share price increases alone (excluding currency fluctuations).

Now it is often easier to find a share that currently yields 5% than to spot a share like Nvidia at the right moment in its development.

But the point is that while dividends can assist augment the value of a SIPP, so can capital gains.

Looking to the future

So for me, the ideal stock for my SIPP is the one that I hope will give me the highest total return (whether in the form of dividends or capital gains), adjusted for long-term risk.

Could Nvidia be such a share?

While I focused on share price growth above, it also actually pays a dividend. Profitability is low at the moment, but if business growth allows the dividend to grow over time, it could augment.

Meanwhile, rising demand for chips could assist boost Nvidia’s sales and profits. Their numbers have grown in recent years, but the best may be yet to come thanks to proprietary designs and a enormous installed user base.

However, the price-to-earnings ratio of 54 is too high for my taste. Risks include a slowdown in artificial intelligence spending, which will negatively impact chip sales.

I won’t be purchasing it for my SIPP for now.