If I had a lump sum of £500 to start investing with today, I would use a diversified approach. As I enjoy studying businesses and analysing stocks and shares, I would buy a basket of individual stocks for my portfolio.

However, I would also add in some funds for diversification. By using investment funds, I can also increase my portfolio exposure to sectors I may not understand myself. 

Start investing with funds 

For example, I would buy the Renewables Infrastructure Group fund for my portfolio to invest in renewable energy assets. The fund’s diversified portfolio of such assets offers exposure to different sectors in the space that I may not necessarily be able to find myself. 

I have also highlighted the Blue Whale Growth fund in the past. This is another investment fund I would buy for my £500 portfolio to start investing. The fund invests in growth stocks around the world. Its managers are able to spend more time analysing growth businesses than I could, which is why I am happy to invest here rather than picking stocks myself. 

Alongside these funds, I would also buy single stocks. As £500 is only a relatively small amount of money, I will concentrate my efforts on my favourite companies. 

Two that I believe have fantastic growth potential over the next few years are Moonpig and Future. 

Growth stocks 

These businesses are some of the fastest-growing tech stocks in the UK, and they both have substantial competitive advantages.

Moonpig has cornered the market for designing and developing greeting cards and gifts. Meanwhile, Future has built a magazine empire, which leverages the company’s exposure to niche audiences to boost advertising. 

Both businesses continue to gain market share by developing their existing products. I think that as long as they continue to invest for growth, they will be able to maintain the hold over their respective markets. 

However, these are both highly competitive markets. As such, I will be keeping an eye on them to see if they are falling behind the competition. If they cannot keep up with peers, they could start to lose market share. This is the biggest challenge they face today.

Income and value 

Another firm I would buy for my £500 portfolio is Royal Dutch Shell. I think shares in the energy company look cheap, and the stock offers a highly attractive dividend yield of 5%.

As the firm moves away from oil and gas towards a greener business model, I think the market will start to re-rate the shares to a higher valuation.

Of course, there is also the risk that the firm will fall behind in the energy transition, and in this scenario, the stock could underperform.  Still, despite this risk, I would be happy to add the stock to my £500 portfolio, alongside the investments outlined above. 

The post How I’d start investing with £500 today appeared first on The Motley Fool UK.

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Rupert Hargreaves has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.