If I had to invest £10,000 right now, I would pick a portfolio of UK shares. This approach may not be suitable for all investors because it requires quite a bit of work. I need to be sure that each business I am going to buy for my portfolio meets my investment goals and valuation requirements.
I would choose this approach over other strategies, such as investing in funds, because I believe I can build more significant exposure to key market themes.
Invest in the rich
For example, over the past 16 months, figures show the wealth of the world’s 1% has grown at an extraordinary rate. One way to invest in this is to own luxury retailers.
There are two companies I would buy to play this theme. The first is the luxury watch retailer, Watches of Switzerland and the second is fashion house Burberry.
These two companies target different segments of the luxury market, watches and clothing. Burberry is a bit more of a specialist luxury retailer because the group produces its own label. This means profit margins are higher but there are more risks. If one of the firm’s new seasonal collections or bag launches fails to appeal to customers, profits could take a hit.
Meanwhile, Watches of Switzerland does not produce its own products. As such, its profit margins are lower. However, its wide range of branded products may appeal more to customers and provide the group with some level of diversification.
Tech sector growth
Alongside these two luxury goods plays, I would also invest in technology stocks Softcat and Computacenter. The technology sector is experiencing rapid growth and I think this trend will only continue.
These two companies help their clients develop and install IT systems. This means they are not as profitable as the software providers, which is a risk, but they offer a more diversified option. Software packages can fall out of favour. Technology won’t. That said, this sector is competitive, so these companies will need to stay alert to beat the competition.
The final two companies I would buy for my £10,000 portfolio are property stocks. The property market in the UK is booming, and experts do not believe this is going to change any time soon. Constrained supply and rising demand will only push up prices, analysts believe.
Property market
To that end, I would invest in Berkeley and Taylor Wimpey. The former is a London-focused developer with an average selling price that’s around 2.5 times higher than that of Taylor.
I think these two stocks will give me exposure to the property market, as well as diversification across different segments of the market.
Unfortunately, their growth could slow if interest rates increase. This may damage demand for mortgages and put consumers off new purchases.
I think all of the six stocks above would give me exposure to some of the market’s key themes, as well as diversification in my £10k portfolio.