Is £1,000 a lot of money? Many people may have different answers to that question. Personally, I could use it to invest in shares I hope to grow in value over time. With a grand in hand, I would hunt for UK shares to buy now and hope to reap the rewards in years to come. Here’s how.
Aiming for growth
If I wanted to grow the value of my £1,000 in years to come, what approach should I take? One route would be to invest in companies I thought could grow their businesses rapidly, hoping that would also benefit their share prices. An alternative strategy would be to focus on income — buying shares with big dividends and hope the dividends keep piling up over time.
I think both investment strategies have potential. But they offer me different types of growth. Investing my £1k in a basket of well-established dividend paying companies could hopefully offer me some financial reward. Although no shares are without risk, with a mix of blue-chip firms I would see that as manageable within my personal tolerance.
By contrast, investing in racier growth shares could carry higher risk. Some may go nowhere fast. Others may end up failing altogether. But if I buy into the right growth story, that might compensate for disappointments elsewhere.
So £1,000 is enough to let me spread my investment across four or five different shares.
Choosing UK shares to buy now
If I did that, how would I choose the shares to buy? First, I would look for business areas I hoped might see robust demand in coming years. Those could be emerging fields like hydrogen energy, or well-trodden paths like retail. Whether old or new, I would select areas where customer demand in one year or a decade from now seems likely to be high.
Then I would look for companies that have some competitive advantage within those areas. For example, Ceres Power has an attractive edge in hydrogen energy. Amazon’s deep customer understanding is hard to match.
Finally, I would look at a company’s valuation. A great company in a growing industry could still be a lousy investment for me if I pay too much for its shares. So I would filter out companies where I felt the valuation looked expensive.
It can be challenging to value growth shares, as a lot of their future growth prospects rely on assumptions that may or may not turn out to be accurate. So I would tend towards companies that already have a trading record showing a proven ability to make profits.
Moving to action
I would then split my £1,000 evenly across four or five such companies. I would make sure to spread my picks and not concentrate in a single industry. That diversification means that if one of the companies, or even a whole industry, turns out to be disappointing, it does not mean my overall portfolio is doomed to disappoint me.
Growth takes time and patience. I would need to be happy to sit and wait, perhaps through many twists and turns. But that is still in the future. First, I need to find the right UK shares to buy now for my portfolio.