How I’d invest £5k right now

Rupert Hargreaves explains how he would invest £5,000 in a basket of stocks and shares today to generate income and capital growth.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

If I had a lump sum of £5,000 to invest right now, I would deploy this capital in a combination of high-quality growth stocks and income investments. 

I think a portfolio split between these two asset classes could produce the best returns on my money. It could also put me on track to generating a passive income from my savings. 

Invest for growth

When it comes to finding growth stocks for my portfolio, I will focus on technology companies. There is no denying this is the fastest growing industry today and, as the world becomes more digitally focused, I think this trend will only continue. 

As such, I would buy Softcat and Computacenter for my portfolio of growth shares. These companies provide computer services to clients to help build out their technology systems

I would buy these stocks over other technology firms because I think there will always be a need for the sort of assistance services both offer. Not every company is a specialist technology business.

However, every business does need specialist technology. Whether it be advanced cyber security systems or cloud computing software, corporations worldwide digitising their systems will need assistance. 

As two of the largest companies in the country specialising in IT services, Softcat and Computacenter seem to be well-placed to capitalise on this trend. 

The most considerable risk facing these companies is competition. The technology market is highly competitive, and both firms need to keep investing in their product to stay ahead. 

Income stocks

When it comes to income investments, I will buy Phoenix Group for my portfolio. This company manages pension policies, which it acquires from other corporations. It can then use its economies of scale to reduce costs and improve cash generation. Cash generated from the assets supports Phoenix’s dividend. The stock currently supports a dividend yield of around 7%. 

I would also acquire BAE Systems for my portfolio. With a dividend yield of around 5%, I am attracted to this company as an income investment. The group generates the majority of its sales from multi-billion pound contracts with governments around the world. These contracts can last for decades, which produces a guaranteed, predictable income stream for the group. 

Few other businesses have the same kind of revenue visibility. 

While these companies both look attractive as income investments today, I should note that dividend income is never guaranteed. Income is paid out of business profits. Therefore, if profits fall, the dividend is usually the first thing to go. That is something I will be keeping an eye on as we advance. 

Even after taking this risk into account, I would be happy to add BAE and Phoenix to my £5,000 income and growth stocks portfolio, considering the qualities outlined above. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be considered so you should consider taking independent financial advice.

Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has recommended Softcat. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Middle-aged white man wearing glasses, staring into space over the top of his laptop in a coffee shop
Investing Articles

With a spare £500 I’d buy these UK shares

A financial services giant, a FTSE 250 distributor, a FTSE 100 tech stock, and a gold miner are on the…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

Should I buy this defensive FTSE 100 stock for growth and returns?

This Fool takes a closer look at a FTSE 100 stock to see if it could boost his holdings via…

Read more »

Young female analyst working at her desk in the office
Investing Articles

I robbed Mr Market of this cheap FTSE stock!

This FTSE 250 stock has crashed by almost 30% in six months. But I recently bought into this battered business…

Read more »

Mature people enjoying time together during road trip
Investing Articles

3 reasons I’m backing NIO shares to soar!

NIO shares have bounced up and down this year. But where will the share price go next? My bet is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

Up 300%, is the Hurricane Energy share price an opportunity too good to miss?

This Fool looks at why the Hurricane Energy share price has soared in the past 12 months. Should he buy…

Read more »

Middle-aged white man pulling an aggrieved face while looking at a screen
Investing Articles

The BT share price crashes 20% in a month. Buy now?

The BT share price has crashed by almost a fifth since coming close to £2 on 12 July. After this…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

How I’d invest £1,000 in growth shares today to target £5,000 in a decade

Our writer reckons he could do well by choosing the right growth shares today and holding them in his portfolio…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

How passive income from stocks can speed up early retirement

By investing patiently over the years, buying quality shares has given me enough passive income to retire 10 or even…

Read more »