If I had £1,000 to invest in the stock market today, I would buy shares using a diversified approach.
I would also use a low-cost broker, such as Freetrade. Most online stock brokers charge a commission for every deal placed. This can range from a few pounds to £15, or more. With a lump sum of £1,000, paying a commission on every trade does not make much sense.
Indeed, if I spread my portfolio across 10 different stocks and paid £10 for each trade, I would instantly lose 10% of my money to commission costs alone. The numbers speak for themselves.
I would also look to buy shares that offer the most growth potential over the next 10 years.
Buy shares for a portfolio
Following this strategy can be challenging. Even the professionals struggle to pick winning stocks consistently. This is the reason why I would diversify my portfolio across a basket of different growth equities. Some of the most attractive growth stocks on the market at the moment, in my opinion, are technology companies.
One of the tech stocks I would buy to play this theme is IT consultancy Kainos. As the world’s digital footprint explodes, I think the demand for IT consultancy services will only increase.
Every company now has to have a digital presence, but not every corporation has the skills required to maintain this. Organisations like Kainos will be instrumental in helping these businesses move into the 21st century.
Unfortunately, the sector is highly competitive. As such, the company’s growth cannot be taken for granted. Dealing with this competition is the biggest challenge the group will face.
Growth investments
As well as tech, I would also add stocks in other growth sectors to my portfolio. The property industry is another growth area I want to build exposure to. I would do that with LSL Property.
This company owns a portfolio of property businesses. This ranges across estate agency to surveying and mortgage broking. It is growing through organic expansion and bolt-on acquisitions. As the UK property market continues to expand, I believe LSL’s growth will continue.
Once again, the biggest challenge the business will have to deal with is competition, as LSL is a small fish in the big real estate pond.
The most speculative stock I would buy is hydrogen start-up AFC Energy. This business could revolutionise the hydrogen market through its green technology. This firm is still in its early stage development, which is why it is so risky. There is a high chance the company could struggle to survive before commercialising its technology.
Still, I think the stock has tremendous potential to revolutionise the energy market. In my opinion, this potential more than offsets the risks associated with the business.