Buying shares can seem daunting at first. However, limiting my options to some of the biggest and most reliable companies in the UK market can be a great initial strategy. If I had a small amount of cash to begin investing today, I’d split it between these two FTSE 100 stocks.
Always in demand
Founded over 100 years ago, not many companies come more established than Tesco (LSE: TSCO). And since we all need to eat regardless of rising prices, the grocery sector is highly defensive. I reckon this makes the supermarket an excellent choice for me if I were starting to invest today.
Despite operating in a competitive space, Tesco has been the clear market leader for many years now. Supported by its highly popular Clubcard scheme, it made almost £55bn in sales in 2021.
With inflation going higher and higher, any business offering to pay me dividends for holding its shares looks attractive. Tesco comes up trumps here too. Based on what the city’s analysts are saying, I’d receive almost 11p this year for every share I owned. That doesn’t sound like much but it can really add up if I’m able to buy more shares every month.
Naturally, this income can never be guaranteed. Dividends can end up being reduced or cut completely if profits dip. Even so, I suspect that won’t be the case here.
Growth area
With half of my cash left to splash, I’d also buy shares in FTSE 100 member Halma (LSE: HLMA). It may not be as familiar to new investors as Tesco but it still operates in a very defensive space.
Halma is actually a collection of companies specialising in life-saving technology. These are things that its clients can’t do without if they are to abide by legislation and protect their workers. As a result, trading is usually robust and only likely to get better over time.
Another reason for buying the stock is that Halma operates in a completely different market to Tesco. Spreading my cash around the market in this way might reduce the damage from being wrong about the supermarket. This is called diversification and it’s something all new investors must grasp.
One issue with Halma shares is that they are expensive. However, much of this is based on its track record of consistently increasing revenue and profits. It’s also hiked its dividend by 5% or more every year… for the last 43 years!
This makes the price worth paying, in my opinion.
No guarantees
Having said I’d buy both of the above, you might be tempted to believe I think their share prices are due to rise. Truth is, I don’t know what will happen next. No one does.
Near-term uncertainty is something all investors — new and experienced — must accept. In the short term, the valuations of companies are driven primarily by emotion. It’s over the long term that things tend to be based on whether they are actually good businesses or not.
Having grown investors’ money well over time (via a combination of capital gains and dividends), I think Tesco and Halma are examples of the former.
I’m convinced that buying their shares would be a great start to my time as an investor.