How would I invest £10,000 today? One option might be Bitcoin. The Bitcoin price hit a new record high of $23,770 last week. A year ago, it was just $6,500. Anyone who has held Bitcoin for 12 months will have seen a profit of more than 240%.
That’s certainly much more than I’d expect from a stock market investment. One reason for Bitcoin’s recent surge may be that several major corporate investors have been buying the cryptocurrency.
Bitcoin’s big backers
In October, US payment processing company Square bought $50m of Bitcoin. In November, UK fund manager Ruffer made a bet on Bitcoin that’s now said to be worth more than £500m. PayPal has also made a recent investment.
However, although these are big numbers, they’re small for the companies involved. Square says that its Bitcoin investment represented around 1% of its total assets at the end of June. Ruffer says that its Bitcoin allocation represents just 2.7% of its total assets.
In my view, Square and PayPal have invested so that they can understand the technology and handle Bitcoin transactions in the future. Similarly, Ruffer described its bitcoin “as a hedge” for some of the risks the fund manager sees in global markets.
I might allocate 2% of my assets to bitcoin. But I’d never invest my entire pot in this way. Last time Bitcoin peaked was in December 2017, when the price got close to $19,000. Over the next year, the price collapsed. By Christmas 2018, Bitcoin had fallen by more than 80% to just $3,500.
Don’t get me wrong. I think the blockchain technology behind Bitcoin is impressive and will probably become more widely used. But this is not how I’d invest £10k today.
How I’d invest
Ten thousand pounds is a substantial amount. If I had £10k to invest, I’d probably want to invest so that I would benefit from long-term global growth. This may sound complicated, but I don’t think it needs to be.
To start with, I’d invest one quarter of my cash in Alliance Trust. This investment trust uses nine top stock pickers to invest in long-term growth stocks from all major markets. Right now, nearly 60% of Alliance Trust’s assets are invested in the US market. Major holdings include Google owner Alphabet, pharma group Novo-Nordisk, and payment group Visa. Alliance Trust’s share price has doubled since March 2014.
I’d also like some exposure to Asian markets. I believe some of the biggest growth stories of the next 20 years are likely to come from this region. Templeton Emerging Markets investment trust offers a high level of exposure to Asia, with around 70% of its assets invested in this region. There’s a strong weighting towards electronics and tech stocks, as you’d expect.
My third pick focuses on good quality smaller companies, mostly from the UK and US. Smithson is run by highly rated fund manager Terry Smith, who owns the Fundsmith fund management business. Smithson is relatively new but has outperformed the FTSE 250 by more than 45% since October 2018.
I’d place the final £2,500 of my cash in a FTSE All-Share index tracker fund. I’d view this as a core holding that would provide stability and exposure to my UK home market.
This is how I’d invest £10k today. My sums suggest that my investment could be worth well over £100,000 after 25 years — a useful retirement nest egg.