Many investors have both a SIPP (Self-Invested Personal Pension) and a Stocks and Shares ISA. They do different jobs, but they can both be fantastic to build wealth for the future.
As such, I buy shares for my ISA and SIPP whenever I have spare money. Across both accounts, I hold almost 30 investments, comprising shares, investment trusts and exchange-traded funds (ETFs).
I would summarise the difference between the two this way:
- SIPP: this money is for when I retire.
- Stocks and Shares ISA: this money is for the future, but I have the option to use it sooner.
For me, there are certain investments I think are best suited for my SIPP. For example, income shares where I reinvest the dividends to fuel compounding. This happens automatically, and any temptation to spend the cash is removed entirely.
But what about hyper-growth stocks such as SpaceX (NASDAQ:SPCX)? But which account is something like this most suitable?
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
The company at a glance
While SpaceX started out as a rocket company (and still is), it has morphed into something far more powerful. By perfecting the reliability of its Falcon rocket, it has managed to put 12,000 satellites (and counting) in orbit.
These form the Starlink internet constellation, which is growing like wildfire. In Q2, revenue for this division surged 66% year on year to $4.3bn. Operating income rose even faster — 79% to $1.7bn.
Meanwhile, SpaceX also has a rapidly growing AI business which saw revenue soar 247% to $2.6bn. The majority of this today comes from renting out compute to Google and Anthropic.
Starship’s importance
These two opportunities — global internet connectivity and AI — offer enormous potential. However, both will need SpaceX’s massive reusable rocket platform, Starship, to really fulfil their ultimate promise.
Not only is Starship needed to reach the Moon, and then perhaps Mars one day, but it’s necessary for SpaceX’s planned constellation of orbital AI data centres (called Starmind). These solar-powered AI satellites, which it’s designing with Nvidia, are too large for the current rockets.
Therefore, the key to unlocking SpaceX’s full potential is Starship and its massive payload capacity. If this system proves to be unreliable, then the long-term bull case around many thousands of AI satellites and a turbocharged Starlink disappears.
Well-suited to a SIPP
Given that SpaceX is positioning itself at the intersection of launch, energy and AI, I think there’s a real chance that it will be significantly larger in 20 years’ time. Perhaps the world’s largest company by some distance.
As this broadly aligns with my retirement age, the SIPP seems a nice fit. And given the ultra-long timeline, I don’t have to worry about sharp share price pullbacks or operational setbacks, which I expect to be numerous.
Plus, while the stock’s expensive today, SpaceX could grow into its valuation over time. And then some.
I’m buying
For the record, I recently added SpaceX to both accounts. They offer tax benefits in different ways — a SIPP gives me tax relief on the way in, while an ISA gives me tax-free returns on the way out.
However, because I plan to hold SpaceX for a decade or more, I’ll be buying shares mainly for my SIPP in the months ahead. Investors could consider following me, while remaining mindful of the risks.
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Ben McPoland owns shares in Nvidia and SpaceX.
This story originally appeared on Motley Fool
