If I had £1,000 to invest now, I would use one of three different strategies.
There are many different strategies investors can choose from to deploy their money. Some of these strategies may be more suitable for some investors than others. For example, growth stocks can be volatile investments. Therefore, owning these types of shares may be unsuitable for investors who are worried by market movements.
As a young investor with many decades to go until retirement, I’m happy to own a broad range of investments. With that in mind, here are three ways I’d invest £1,000 today.
Where to invest now with £1k?
Research has shown that small and mid-cap stocks can generate better returns than large caps. However, buying individual small caps can be risky because these smaller companies lack the checks and balances in place at large enterprises.
As such, one investment I’d buy with £1,000 is the Mercantile Investment Trust. This trust focuses on mid-cap companies, mainly firms listed in the FTSE 250. Current portfolio holdings include homebuilder Bellway and table-top gaming business Games Workshop. The trust charges an annual fee of 0.51% and offers a dividend yield of 2.5% at present.
As a way to invest in a diversified basket of high-quality mid-cap stocks, I think this investment trust is one of the best offerings on the market. The primary risk of owning stocks through a trust is the risk that the manager will make some bad calls. This could hold back returns and possibly even inflict losses on investors.
Another strategy I’d use to invest now in the market is to acquire a passive tracker. One fund I’ve got my eye on is the Vanguard Equity Income Fund. This fund owns some of the highest-yielding stocks in the FTSE All-Share index. It charges an annual fee of 0.14% and currently offers a distribution yield of just under 4%.
One of the benefits of having a passive fund like this is there’s no chance the manager will pick the wrong investments. This is because all the fund managers do is track an index, which is the UK Equity Income index.
That said, there’s also no chance the fund will outperform. That’s the most considerable risk of holding a passive fund. It could struggle to keep up with more active peers like the Mercantile Investment Trust. As such, I own a blend of passive and active investments in my portfolio.
If I were to invest now, I would buy a growth stock alongside the opportunities outlined above.
There are many options here, but one company that stands out to me is FTSE 100 health and safety business Halma. This firm has an excellent track record of organic growth and growth through acquisitions. Health and safety is one of those sectors that’s never going to go away. So as long as Halma can keep competition at bay, I think the business should continue to grow.
This may be easier said than done. The company uses a lot of debt to fund acquisitions, which could cause problems if growth slows. Another risk is competition, which may depress margins if Halma gets caught up in a price war.
By combining these three assets, I can build a portfolio of income and growth investments with £1,000.
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Rupert Hargreaves owns shares in the Mercantile Inv Trust. The Motley Fool UK owns shares of Games Workshop. The Motley Fool UK has recommended Halma. 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.