If I had a lump sum of £500 to invest in stocks and shares today, I would look to buy my top stocks. Thanks to the rise of low-cost and free online stockbrokers in recent years, investors can now build a diversified portfolio quickly and cheaply.
Indeed, using a broker such as Freetrade, I can build a portfolio of global stocks for almost nothing.
I would take advantage of these factors to build my portfolio and would invest my £500 in a range of global stocks and shares to try and get the most for my money.
Investing in stocks and shares for growth
My portfolio build would start with a couple of high-quality blue-chip stocks. There are two companies I have in mind.
Apple is one of the world’s largest companies. It has millions of users worldwide who are willing to pay a premium for its products. It seems unlikely this tailwind will come to an end any time soon. As such, I would buy shares in the technology giant for my £500 portfolio.
Alongside Apple, I would also acquire UK drinks giant Diageo. I think both of these firms have similar qualities. Like Apple, Diageo owns a portfolio of world-leading products, and it can demand higher prices from buyers as a result. As long as it keeps investing in its product offering, I reckon it will be able to maintain these advantages.
Both of these companies have the advantage today, but this may not last, of course. If they underestimate the threats from competitors, they could start to lose market share. This is the biggest challenge they face, and it is something I will be keeping a close eye on as we advance.
As well as the growth companies outlined above, I would also buy income equities. Two corporations I like for this bucket are Vodafone and BP. These firms both yield around 5%, and more importantly, their dividends are supported by robust cash flows. This should support the payouts to investors, although no dividend is ever guaranteed. If either company faces a sudden drop in income, they may have to slash their dividends.
With income and growth stocks covered, I would invest the remainder of my portfolio cash in a couple of speculative names. As these are speculative plays, I would only allocate a small percentage of my portfolio to these names. That way, I should be able to minimise any losses in my portfolio if they do not perform as expected.
Harbour Energy and Lamprell are my speculative names. Harbour is benefiting from rising oil prices, allowing the group to reduce debt and invest in growth. Meanwhile, Lamprell is pivoting from oil and gas engineering to renewable energy engineering. This is a booming market, and if the firm can capitalise on this market growth, it could see a significant uplift in profits.
I think these two speculative plays would provide some additional growth potential to my £500 portfolio, even though their performances are not guaranteed.
The post How I’d invest £500 in stocks and shares today appeared first on The Motley Fool UK.
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Rupert Hargreaves owns Diageo. The Motley Fool UK has recommended Apple and Diageo. 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.