If I wound back the clock to when I was first picking stocks, I would make several changes. I put too much money in too few stocks, followed the crowd with FOMO (fear of missing out) and didn’t know when to sell. Therefore, if I could start over and give myself a grand right now, here are the FTSE 100 shares I’d buy.
Diversification is key
Whichever stocks I’d choose to buy, I’d split it up in several ways. To begin with, the number of stocks. I’d choose half a dozen and evenly pick shares to fit the bill. If I bought 10 or more, my money would be so diluted that it wouldn’t really make a difference if the firm performed well or not. Yet if I only bought one or two shares, my return could be ruined by just one poor idea.
I’d also split up the FTSE 100 stocks by geography and sector. What’s the point in owning six companies that focus on the UK market in the same business area? The performance of all would be closely linked. This could be great if the sector does well, but at the same time it seems a bit pointless to take on that risk. Rather, by mixing up the sectors, I should hope to have a smoother ride and better long-term performance.
Stocks to buy
The three sectors I’m keen on right now are property, finance and travel. It’s from these areas that I’d look to allocate my £1k at the moment.
The lean towards property is based on my thinking that interest rates will fall in the UK soon. This should help to boost property-related stocks as typically a loan is needed to purchase property. This doesn’t matter if we’re talking about a commercial investment trust or a homebuilder that sells to the public. Funding property via borrowing money is very common. Lower interest rates make it cheaper to finance, so I’d expect demand to increase.
The risk with this area is that it depends on how extensive the rate cuts are. If we just get one or two small cuts, it might not yield much benefit to the market.
Two ideas from this area that I’d consider to include would be Taylor Wimpey as a builder and Rightmove as a property portal.
More of my picks
Finance (and more specifically investment firms) is my next area. This is based on the fact that the movements in interest rates have made more people focus on their finances.
I think this bodes well for retail advisor St. James’s Place, as well as M&G. Both are well-known and although they differ in terms of the offering, I think both could benefit over the coming year from higher assets under management.
My risk here if we have high volatility in the stock market. This could cause investors to pull their money and sit in cash instead.
Finally, I’d pick two stocks from travel. These would be the InterContinental Hotels Group and International Consolidated Airlines Group. We’re finally back to a position where airlines and hotels are back (or almost) at pre-pandemic levels. I believe this could make 2024 the year where this sector finally shines again.
