UK investing can seem like a challenging prospect at first for beginners. There are hundreds of funds and stocks out there on the market, and trying to pick which stocks to buy today can seem like a daunting task.
My preference is to use a diversified approach. Rather than picking just one or two stocks or shares, I think a portfolio of at least 30 stocks is the best solution. This may be difficult with an investment of just £5,000. As such, a fund may be a better option for investors with limited cash to invest. By acquiring an investment fund, investors can gain access to a diversified basket of stocks at the click of a button.
However, if investors are comfortable with the risks of investing in just a small selection of companies, this approach can work. Investing in equities in different sectors and industries can remove some risks, although it will not eliminate them. Whichever strategy investors choose, it is vital to remember that we should only invest as much as we can afford to lose.
With this in mind, here are the five UK investing champions I would buy with £5,000 today.
BHP is the world’s largest mining company. That’s why I’d buy this firm to gain exposure to the resources sector. Bumper profits last year have enabled the business to declare a record dividend recently. If commodity prices remain high, the corporation may report another outstanding performance in 2021. This is far from guaranteed. Commodity prices can be highly volatile, and if they fall too far, BHP may end up nursing a loss.
Sticking with commodities, I’d also buy BP for a portfolio of shares with £5,000. This UK investing champion is one of the world’s largest oil companies. Management is planning to invest billions of dollars over the next few years to expand its renewable energy business. I think this could lead to a significant re-rating of the stock if it translates into earnings growth.
Unfortunately, the transition won’t happen overnight. In the meantime, the organisation remains exposed to highly volatile oil prices. Last year the group reported one of the largest ever losses for a UK company, following the oil price slump. That really hurt investors, and there’s no guarantee it won’t happen again.
Stocks to buy today
In the healthcare sector, I would buy AstraZeneca. This company has been in the headlines recently for its coronavirus jab, but this is only part of its portfolio. The firm is also a leader in oncology, or cancer, treatments. I believe these will drive growth for the firm in the years ahead. Growth won’t come in a straight line, however. The firm faces many risks, such as lawsuits and product failures, which can cost billions. A lack of new treatments may also cause its income to fall.
In the financial and consumer goods sectors, I’d buy Unilever and Legal & General. These UK investing champions are world-beating companies with diversified operations and highly skilled management teams. I believe they have the size and experience to navigate all market environments. Nevertheless, risks such as rising commodity prices and increased regulation could hurt these businesses and pull down profit, which may harm their share prices.
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Rupert Hargreaves owns shares in Unilever. The Motley Fool UK has recommended Unilever. 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.