Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing in April.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

If I were lucky enough to have £8,000 burning a hole in my pocket today, I’d start investing in the stock market. That’s because history has long shown its wealth-creating powers.

For instance, an average 10% return per year would transform my £8,000 investment into approximately £33,417 after 15 years.

However, if I invested another £500 a month, assuming the same 10% return, that £8,000 would grow into a huge £232,790 after 15 years. That’s due to the power of compound returns (interest upon interest).

Here are two areas of the stock market that I’d consider investing in right now to get the compound snowball rolling.

Discounts galore

First up are investment trusts. These are closed-end funds that are listed like stocks. Interestingly, this means they can trade at what are known as discounts or premiums.

This refers to the difference between the market price of the investment trust’s shares and its net asset value (NAV) per share. If the share price is lower than the NAV, it’s trading at a discount, and vice versa.

Right now, the whole sector has been marked down and is trading at a discount. But I don’t think it will always be this way. Indeed, these discounts have already started to narrow.

One I still like the look of though is Schiehallion Fund (30% discount), which has a large holding in Elon Musk’s rocket firm, SpaceX.

Alternatively, there is BlackRock World Mining Trust (7% discount). As the name implies, this invests in global mining stocks and has a portfolio bias towards precious metals and copper.

Long term, I think the shares will do well due to the energy transition’s need for incredible amounts of raw materials. The stock carries a 6.5% dividend yield.

Source: BlackRock World Mining

Both of these trusts have their individual risks. Schiehallion has a large holding in ByteDance, the owner of social media sensation TikTok, which the US could soon ban. That might knock its share price temporarily.

Meanwhile, rising ‘resource nationalism’ may threaten the long-term valuations of mining stocks.

High-yield FTSE 100 shares

Next, I’d target cheap FTSE 100 stocks carrying chunky dividend yields. I’m talking about those with 7%-9% yields.

Again, I don’t think these yields will always be this high, especially once interest rates come down and more money moves back into stocks.

That’s why I’d buy shares of insurer Legal & General (LSE: LGEN) to lock in a near-8% yield.

The company has an incredible track record of raising its annual dividend over many decades. It even carried on paying shareholders during the pandemic, as we can see below.

Financial yearDividend per share
2025 (forecast)22.5p
2024 (forecast)21.4p
2023 20.3p

Assuming that forecast dividend for 2025 proves accurate, which isn’t guaranteed, that translates into a forward yield of 8.8%. That soars above anything I’d get from holding cash and most other stocks.

Now, one thing I’d highlight here is that the firm has a new CEO. We don’t know exactly what his plans are yet, but international expansion seems likely. That could open up execution risks.

Nevertheless, I like the firm’s trusted brand, strong balance sheet, and vast experience in pensions and asset management, Plus, the shares are cheap and there are those very generous dividends.

I’d happily buy more shares at £2.54 a pop.

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 assessed. Consider taking independent financial advice.

Ben McPoland has positions in BlackRock World Mining Trust Plc, Legal & General Group Plc, and Schiehallion Fund. The Motley Fool UK has 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.

More on Investing Articles

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

Investing freedom — but inside a pension

Strapped consumers might be cutting back on investing, but they’re still keeping up their pension contributions. The only problem? A…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

Forget gold! I’d rather buy these 3 FTSE high-yielders in a Stocks and Shares ISA

Gold looks like a risky investment to me as the price hits an all-time high. I'm ignoring the fuss to…

Read more »

Young female business analyst looking at a graph chart while working from home
Growth Shares

This 55p UK stock could rise more than 300%, according to a City broker

This UK stock has fallen from above 800p to below 60p. But analysts at Citi believe it’s capable of a…

Read more »

Businesswoman analyses profitability of working company with digital virtual screen
Investing Articles

I think this FTSE 250 trust has all the right ingredients to lock in long-term profits

Today I'm examining the prospects of a private equity investment trust on the FTSE 250 that caught my attention recently…

Read more »

Young black man looking at phone while on the London Overground
Investing Articles

2 under-the-radar UK shares investors should consider snapping up

Two UK shares have caught the eye of our writer. She explains why investors should be taking a closer look…

Read more »

Investing Articles

Are these 2 ultra-high-yielding income stocks a good buy for me?

These two income stocks often split the debate amongst investors. So what does our writer think of them as potential…

Read more »

Senior woman potting plant in garden at home
Investing Articles

5% yield! This dividend stock could be great for my retirement

Our writer explains why this dividend stock appeals to her as she’s investing to build wealth to enjoy in the…

Read more »

A young Asian woman holding up her index finger
Investing Articles

I’d aim for a second income of £1,000 a month with this super-reliable dividend stock

I think a great way to build a second income stream is by investing in dividend stocks via a Stocks…

Read more »