The rise of ultra-low-cost online stockbrokers such as FinecoBank and DEGIRO means it’s now possible for anyone to start investing in stocks and shares.
If I had £500 to invest in the stock market today, using these low-cost brokers, I’d build a small portfolio of stocks spread across blue-chips and more speculative investments.
The latter would include smaller companies, as well as technology businesses. I think some exciting developments are occurring in the tech sector, and I want exposure to these trends.
However, this strategy may not be suitable for all investors. I’m still relatively young, which means I can take more risks in my portfolio.
Investment advisors generally recommend that risk-averse investors, or those nearing retirement, don’t deal in speculative stocks and shares. Still, I’m comfortable with the level of risk involved in buying smaller businesses.
Stocks and shares to buy
With an investment of £500, I’d acquire around five shares, as this would allow me to build a small position in each business without spreading my money too thinly.
Two technology businesses I’d buy are Blue Prism Group and Kainos Group. I class these companies as speculative because they’re both small players in vast industries with deep-pocketed competitors.
Blue Prism Group supplies robotic process automation software. Kainos provides IT, consulting and software services to businesses, governments and healthcare providers.
The latter reported revenue growth of 23% in the first six months of its 2021 financial year. Meanwhile, Blue Prism announced a strong full-year 2020 performance with an estimated 40% growth in revenues. For the first half of its 2021 financial year, revenues increased 24%.
While there’s no guarantee this growth will continue, I want to own these two stocks in my £500 portfolio to build exposure to different parts of the growing technology industry.
Alongside these more speculative investments, I’d also acquire FTSE 100 tech stock Avast. This cybersecurity firm reported organic revenue growth of 7.9% in 2020 and expects to deliver organic revenue growth in the range of 6% to 8% in 2021. As the world becomes more interconnected, cyberattacks are increasing. I think this presents a tremendous opportunity for companies like Avast.
That said, this sector is highly competitive. Avast needs to keep spending on research and development, or it could be left behind. This is probably the biggest challenge facing the group right now.
Strong foundations
As well as the company’s above, I’d also buy slow-and-steady consumer goods giants Unilever and Reckitt for my £500 portfolio of stocks and shares.
I think every portfolio needs a solid foundation — companies that have shown themselves to be relatively defensive in all economic environments. I believe Unilever and Reckitt fit the bill here and complement the high-growth tech stocks outlined above.
They also offer more in income, with dividend yields of 3.5% and 2.7% respectively. The biggest challenge both companies face right now is rising costs. These could hurt profit margins, which may impact shareholder returns.
Despite this challenge, I’d buy both stocks and shares to form the foundations of my £500 portfolio.
