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With £10,000, I’d buy these 10 FTSE 100 shares and hold for 10 years

Light bulb with growing tree.

What would I do if I had £10,000 to start investing today? Firstly, I’d thank my lucky timing to be getting started at a time when there are so many cheap FTSE 100 shares to buy.

I’d want a selection of FTSE 100 sectors, but I wouldn’t spread the cash so thinly that I end up paying high charges. I reckon 10 pots of £1,000 is a cost-effective allocation.

I wouldn’t buy any just for the sake of diversification, though. No, I’d always choose a stock on its own merits.

So many to buy

There are numerous combinations of 10 shares that could make a great portfolio. The following is one set that I’d be happy to own for at least 10 years:

Company Recent price Forecast P/E Forecast Dividend
Lloyds Banking Group 48p 7.0 5.1%
Taylor Wimpey 108p 5.9 8.6%
Aviva 444p 19 7.0%
National Grid 1,038p 10 5.1%
Imperial Brands 1,930p 8.5 7.3%
Rio Tinto 4,710p 5.3 9.0%
GSK 1,330p 11 4.6%
BAE Systems 772p 16 3.4%
Tesco 232p 11 4.6%
Scottish Mortgage Investment Trust 835p (*see below) 0.6%
(Sources: Yahoo! ShareCast, company sites)

(*As an investment trust, I think the Scottish Mortgage discount to NAV is a better measure, and that’s 10% at the time of writing, which is good.)

They’re mostly companies on low price-to-earnings (P/E) multiples compared to the FTSE 100 long-term average, and higher-than-average dividend yields.

Scottish Mortgage Investment Trust is an obvious exception. It invests for international growth, holding a number of stocks on the US Nasdaq technology index.

A bit of growth

I mostly invest for income, but I like the idea of allocating a tenth of my cash to growth. It’s a relatively small portion to risk. And by going for an investment trust, I get diversification from just one investment.

BAE Systems might not look cheap on these measures. But I see it as a recovery candidate, and analysts are forecasting earnings and dividend growth over the next few years.

There are other recovery candidates that I’ve chosen to avoid. One is Rolls-Royce Holdings, which I do actually find quite tempting. But its huge debt adds too much risk. I also see the strongest aviation prospects as probably in defence now, and I have that covered with BAE.

I wouldn’t go for International Consolidated Airlines, the owner of British Airways. That’s largely because I don’t like airlines at the best of times, due to the severe price competition they face, coupled with costs that are largely outside their control.

FTSE 100 alternatives

Of the others, there are alternatives I’d be happy with. There’s Barclays in the banking sector, for example. And Legal & General from the insurance industry. AstraZeneca and British American Tobacco are also possible alternatives to GSK and Imperial Brands respectively.

All of my chosen FTSE 100 shares have their own risks, which investors should research for themselves before they consider buying. And the whole lot could fall in the short term, depending on how the economy goes.

But if I had to choose 10 stocks to invest £10,000 in, and switch off and hold for at least 10 years, I don’t think I could do much better.

The post With £10,000, I’d buy these 10 FTSE 100 shares and hold for 10 years appeared first on The Motley Fool UK.

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Alan Oscroft has positions in Aviva, Lloyds Banking Group, and Scottish Mortgage Inv Trust. The Motley Fool UK has recommended Barclays, British American Tobacco, GSK plc, Imperial Brands, Lloyds Banking Group, and Tesco. 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.