If I had a spare £1,000 to put to use in the stock market right now, how would I do it? What would be the UK shares to buy now that could meet my investment goals?
There are certainly some attractive options available right now. But even good companies can face bad circumstances. So to reduce my risk, I would diversify my holdings. Even with £1,000, it would be possible to split my funds across two or more companies.
Going for growth
One investment approach would be to focus on companies where I saw the potential for long-term growth in customer demand. An example is self-storage. With increasing property prices and a shift to working models without offices, I expect demand to keep growing in years to come for self-storage providers such as Safestore and Big Yellow. I do think the low barriers to entry of local players buying warehouses could hurt industry profitability. But I expect continued growth in demand to translate into larger revenues. Over time, I think that should be good for profits.
I also see prospects for ongoing demand growth in medical devices. As the pandemic has less effect on daily life in many markets, elective procedures in hospitals should increase in number again. That could be good news for a company like Smith & Nephew. Its range of devices is known and liked by many medical professionals. Management has set out plans to focus on improving growth rates. Ongoing delays to procedures threaten revenues and profits in the short term. But I see Smith & Nephew as a long-term success story I would be happy to own in my portfolio.
Income picks
As well as growth, I would be happy to boost my passive income streams by allocating at least some of my £1,000 to dividend shares.
Tobacco shares are a common income pick among investors. Imperial Brands yields 7.7%. Competitor British American Tobacco announced a dividend increase yesterday and yields 6.6%. Both face the risk of declining cigarette volumes hurting revenues and profits. Their premium brand portfolios may help them offset some of the volume decline by increasing prices. They are also pushing into non-cigarette products, with British American reporting a 42% jump in such revenue last year to £2.0bn. Meanwhile, cigarettes remain a cash cow.
I would also consider some insurers for my portfolio. Legal & General yields 6.4%, while rival Direct Line offers 7.3%. Both these UK shares benefit from established brands that help attract and retain customers. I expect demand for insurance to remain high in future, which could make for strong future profits. But the impact of insurance renewal pricing rules introduced last month remains to be seen. It could be a drag on profitability.
UK shares to buy now
I reckon there are a lot of attractive companies currently commanding reasonable prices in the stock market. With £1,000 to invest, I would be happy to spread my money across three or four of them in different business areas.
That would give me a small but diversified portfolio, hopefully with potential for growth as well as income. Starting with £1,000, I believe I could lay the foundations for a bigger portfolio of UK shares in future.