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

Bear markets can create amazing opportunities for long-term investors. However, investing £10k is this market requires a strategic approach, says Edward Sheldon.

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.

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.

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.

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.

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.

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.

More on Investing Articles

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

8%+ yields! Should I buy these FTSE 100 income shares this month?

Christopher Ruane weighs some pros and cons of two FTSE 100 shares, both of which have a dividend yield over…

Read more »