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How I’d invest £10k in this bear market

When the stock market crashes, as it has in recent weeks, many investment opportunities emerge for investors who have cash on the sidelines. Those with money to invest today are in a great position.

That said, investing in a bear market has its challenges. Risk management is absolutely crucial. With that in mind, here’s a look at how I’d invest £10k in the stock market today.

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How I’d invest £10k

As always, the first thing I’d do is think about structuring my investments tax-efficiently. It goes without saying that the less profit you pay in taxes, and the more you keep for yourself, the better.

One of the easiest ways to invest tax-efficiently in the UK is through a Stocks and Shares ISA. With this account – which has an annual allowance of £20k – all capital gains and income are completely tax-free. So, I’d open a Stocks and Shares ISA with a reputable online broker such as Hargreaves Lansdown or AJ Bell to invest my £10k.

My £10k investment strategy

Now, £10k is not really enough to build a diversified portfolio of individual stocks. To be properly diversified, you need to own at least 20 stocks (preferably more). That’s a lot of money (£200+) spent on trading commissions and stamp duty.

For a £10k investment, I’d invest in a selection of funds instead. With funds, your money is pooled together with the money of other investors and spread out over many different companies, reducing your stock-specific risk. For smaller amounts of money, it’s generally more cost-effective than buying individual shares.

As for which funds I’d invest in, I’d pick a number of global equity funds that invest in companies listed all around the world. I’d also go for funds that have a focus on high-quality companies that should be resilient in the event of a prolonged economic downturn.

One fund that has this kind of focus is Fundsmith Equity. It focuses on robust companies that are financially sound and have attractive long-term growth prospects. Another fund with a focus on quality is the Lindsell Train Global Equity fund. Both of these funds have outstanding long-term performance track records.

In the exchange-traded fund (ETF) space, one fund I’d consider is the iShares Edge MSCI World Quality Factor UCITS ETF. This is a low-cost tracker fund that focuses on companies that demonstrate strong and stable earnings and have low debt – a solid strategy in these uncertain times.

Risk management

Finally, I wouldn’t invest the £10k all at once. Given the enormous amount of uncertainty the world is facing right now, there’s a chance that stocks could fall further in the near term.

What I would do is drip-feed £2.5k into my portfolio of funds every month for the next four months. That way, if stocks were to fall another 20% to 30% in the months ahead, I’d be able to capitalise.

So, that’s how I would personally invest £10k in this market. If you’re looking for more bear market investment ideas, you’ll find plenty right here at The Motley Fool.

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Edward Sheldon owns shares in Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. 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.