My stocks and shares ISA are up almost 40% in 2024! Here is my strategy for 2025

We’re less than a month away from the end of 2024, and so far it’s been a great year for my Stocks and Shares ISA. Since January, my portfolio has generated a total return of over 37%, even exceeding the S&P500, who is also on an impressive 28% winning streak.

But what drove these market-beating returns? And what am I doing to try to replicate this success in 2025?

Balancing growth and risk

Currently I have 24 stocks in my ISA. Most investors would agree that this suggests that it is a fairly diversified wallet. Yet while these investments cover a range of sectors and geographies, my ISA is actually very concentrated, with just over 60% invested in just five stocks: Shopify, Arista Networks, Alpha International Group (LSE:ALPH), Intuitive surgicalAnd MasterCard.

This level of focus is not how my portfolio started. In fact, each of these positions initially received the same amount of starting capital. However, over time, continued success coupled with a few supplements increased their weight and influence on my overall ISA. And that focus has paid off, as all five companies have delivered double-digit returns over the past 11 months.

Of course, concentration also has its downsides, particularly when it comes to short-term stock price volatility. And if one of these companies went bankrupt, a significant portion of my growth portfolio could be at risk. It goes without saying that not everyone has this level of risk tolerance. However, I remain confident. For what? Because, as with all the stocks in all my portfolios, these companies have strong competitive advantages.

Arista Networks, Intuitive Surgical and Mastercard are already practically monopolies. Shopify is trying its best to become one with almost 10.3% of the global e-commerce market under its thumb. And Alpha Group International has carved out its own niche in the fintech alternative banking sector, with its competitors unsuccessfully trying to squeeze it out.

Investing in front of the crowd

The 30%+ return my stocks and shares ISA generated in 2024 was not driven by the investments I made this year. Instead, these gains come from purchases made in 2022 and 2023. As the U.S. stock market plunges inflation and interest rates skyrocketed, investors had the opportunity to acquire high-quality companies at rock-bottom prices.

Today, my strategy remains the same. There are still many underappreciated growth stocks in the market, potentially including Alpha Group International.

Adverse economic conditions are creating numerous headwinds within the alternative asset management industry that Alpha serves. Meanwhile, reduced spending by companies awaiting lower interest rates is also reducing demand for its foreign exchange risk management services, leading to slower-than-normal growth.

This cyclicality constitutes a risk that is unlikely to disappear any time soon. And the impact of a prolonged economic downturn is evident when you look at your finances. However, as these macroeconomic headwinds slowly dissipate, Alpha could be bracing for a much more explosive 2025 and beyond.

That’s why I’m buying more while it’s still under temporary pressure, in anticipation of what could be an impressive rebound over the next 12-18 months. And it’s not the only growth stock I’m buying this year.