If I had a spare £1,000, here’s where I’d invest in the stock market now

Jon Smith runs over his four favourite sectors in the stock market that he feels could grow a £1,000 investment considerably over the next decade.

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There’s merit in thinking that now’s a good time to be putting money into the stock market. The performance of the FTSE 100 in the past few months has been very impressive.

Yet I feel there’s a big difference between wanting to invest simply because I don’t want to miss out, and knowing specifically which areas of the market I should be investing in. Therefore, here are my top sectors I’m focused on.

Dividing up my money

With my theoretical £1,000, I’d split it into four chunks of £250. I’d allocate each portion to a different sector. Within that, I’d choose one or two stocks in that space that I feel fit my needs well. I don’t want to divide my money up even more because it starts to get too diluted.

The four sectors I’m going to target are healthcare, renewable energy, finance, and technology.

Future growth potential

Healthcare is the first sector I’d invest money in now. Even with the negative impact of the pandemic behind us, the need for drugs and related products remains high. As of last year, 19% of the UK population were aged 65 or over. This is expected to grow to 22% in the next 10 years (circa 13m people). The ageing population will mean more demand for medicine and the development of new medical products.

I do need to be careful on the specific stocks I select. Some smaller companies can have everything pinned on the success of just a couple of drugs, which can be very risky if they don’t take off.

The second area is renewable energy. I think few of us would disagree that over the next decade, more of our energy usage is going to come from renewable sources. Getting exposure to this sector is becoming easier. There are good investment trusts that own solar and wind infrastructure that should see direct benefit from higher demand usage.

One risk with this area I am aware of is that more and more firms are looking to enter this space. This could drive down the profits of existing companies as the business landscape becomes more competitive.

Riding the wave of interest rates and AI

Finance and banking stocks rarely go out of fashion. Granted, we could see another financial crisis like 2008 again. But for the next few years, I expect the sector to generate strong profits. This is primarily due to interest rates staying high, as central banks try and bring inflation back down to target. Here in the UK, the target is 2%, with it currently above 10%. It’s going to take years for this to come lower. In the meantime, the banks will be able to earn strong net interest income.

A concern is that if the UK economy really takes a turn for the worse later this year, loan defaults could trigger losses for the banks.

Big tech is the last area that I’d park some of my £1,000 in. I want to specifically focus on artificial intelligence (AI) and robotics. This area has really started to grow and I feel it’s definitely the future. Hopefully, it won’t take my job as a content writer, but if it does, I’ll hope to live off the profits from the AI stocks!

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Jon Smith and The Motley Fool UK have no position in any of the shares mentioned. 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.

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