Trying to decide where to invest your money can be a challenging task. There are so many stocks and funds to choose from, so where do you start?
Today, I’m going to try and cut through the noise by explaining where I would invest £10,000 right not and give you some tips on how to invest your money successfully for the future.
The first thing I’d do with £10k right now is invest around 40% in two low-cost bond funds. I think this will provide an excellent base for your portfolio.
Bonds are generally viewed as safer investments than stocks. They provide a steady, fixed income and are less volatile. They also tend to move in the opposite direction to stocks. So if the stock market crashes, bond prices will increase, which should protect your portfolio to a certain degree from market volatility.
There’s currently a whole range of low-cost bond funds you can select to fill in this gap. I would recommend one fund that invests in government bonds and one that invests in corporate debt. Government bonds tend to be safer, but corporate debt usually offers a higher interest rate. Combining both should give you the best of both worlds.
With the base of the portfolio in place, I can start adding some risk. First of all, I’m going to recommend an international stock fund. The iShares MSCI World GBP Hedged UCITS ETF is a straightforward way to build a global portfolio at the click of a button. What’s more, the ETF is hedged back to sterling, so you don’t have to worry about foreign currency fluctuations eroding your profits.
Although it claims to be a global stock tracker, more than two-thirds of its assets are invested in US, Japanese and UK equities, which makes sense because these are the largest equity markets in the world.
I believe every portfolio should have exposure to international stocks, which is why I’m recommending a 20% allocation towards this investment. Allocating a fifth of the portfolio towards this one tracker might seem excessive, but with 1,644 holdings across various countries and sectors, it’s probably one of the most diversified stock funds around.
So far, I’ve invested £4,000 in bonds and £2,000 in global stocks. That leaves me with £4,000 to play with. Because this isn’t really enough to build a diversified portfolio of single stocks, I think it’s better to invest this sum in two UK-focused tracker funds. The indexes I’ve chosen are the FTSE All-Share Index and FTSE 250.
Both of these are relatively easy to track and will give investors instant exposure to UK stocks. The FTSE 250 is a bit more focused on domestic equities because it excludes shares in the FTSE 100. The FTSE All-Share comprises the top 600 companies traded on the London Stock Exchange. Together, these two indexes will give exposure to some of the top companies in the UK without too much exposure to individual businesses.
- The State Pension age is rising. Here’s what I’d do to protect myself
- How low can the Sirius Minerals share price go?
- Forget Sirius Minerals, gold, and Bitcoin! I’d aim for a million like this
- The Lloyds share price has slumped 25%! 3 reasons why I think it’ll keep sinking
- Why I think you need £250,000+ to live comfortably on the State Pension
- Top shares for 2019
Rupert Hargreaves owns no share mentioned. 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.
Motley Fool UK 2019