If you have £10,000 to invest in FTSE 100 stocks right now, you’re in a good position. Currently, the index is around 25% below its 2020 high, which means there are plenty of opportunities.
That said, a strategic approach to investing is sensible. Now is not the time to be wading blindly into the market. With that in mind, here’s a look at how I’d invest £10k in the FTSE 100 today.
The FTSE 100: a stock picker’s index
Given the high level of economic uncertainty associated with the coronavirus, I firmly believe that now is the time to be picking individual FTSE 100 stocks, as opposed to investing in the whole index through a tracker fund.
The reason I say this is that a tracker fund is going to provide you with exposure to a lot of companies that are experiencing challenges right now.
For example, a FTSE 100 tracker has a large weighting to oil stocks such as Shell and BP. With the oil price currently near historic lows, these companies are likely to struggle. This week, Shell cut its dividend for the first time since World War II.
Similarly, the FTSE 100 has a large weighting to banks, which are also likely to struggle due to the coronavirus. This week, Lloyds reported a 72% drop in profit before tax for the first quarter.
All things considered, I think picking stocks is a much safer investment strategy than buying an index fund at the moment. But which stocks would I invest in?
Reliable earners
Right now, there are two main types of FTSE 100 stocks I would invest in. The first type is reliable earners.
This includes the likes of consumer goods champions Unilever and Reckitt Benckiser, and alcoholic beverage group Diageo.
These companies tend to be more resilient than most companies due to the nature of their products. For example, while many companies have been reporting falling sales recently, Reckitt reported a brilliant set of Q1 results this week, in which sales jumped 13%.
All three are reliable dividend payers too. Unlike many other stocks in the FTSE 100, none have announced dividend cuts recently.
These kinds of stocks make excellent core holdings, in my view.
FTSE 100 growth stocks
The second type of FTSE 100 stock I’d invest in is those with strong long-term growth prospects. More specifically, I’d look at companies that have technology at the core of their business. I’m convinced the Covid-19 pandemic is going to speed up the digital revolution.
One company I like a lot is Sage. It provides cloud-based accounting solutions to businesses. I believe it’s well-positioned for growth as the world becomes increasingly digital. Other tech-focused companies I like include Rightmove, the UK’s largest property website, and Hargreaves Lansdown, the UK’s largest online investment platform.
Two wealth-boosting tips
Of course, investing isn’t just about picking the best stocks. If you have £10,000 to invest, I’d suggest doing two things.
Firstly, make sure you invest within a tax-efficient account such as a Stocks and Shares ISA. This will protect your gains from the taxman.
Secondly, don’t invest your money all at once. Instead, drip-feed it into the market slowly. This will protect you if the FTSE 100 volatility we saw in March returns.