If I had to invest £ 10,000 right now, I would choose a portfolio of UK stocks. This approach may not be suitable for all investors as it requires a fair amount of work. I need to make sure that every company that I am going to buy for my portfolio meets my investment objectives and my valuation requirements.
I would prefer this approach to other strategies, such as investing in funds, because I believe I can build more exposure to key market themes.
Invest in the rich
For example, in the last 16 months, the numbers show the wealth of the 1% of the world has grown at an extraordinary rate. One way to invest in this is to own luxury retailers.
There are two companies that I would buy to play this theme. The first is the luxury watch retailer, Watches from Switzerland and the second is the fashion house Burberry.
These two companies target different segments of the luxury goods, watchmaking and clothing market. Burberry is a little more of a brand specializing in luxury because the group produces its own brand. This means that the profit margins are higher, but there is more risk. If any of the company’s new seasonal collections or bag launches don’t appeal to customers, profits could suffer.
Meanwhile, Watches of Switzerland does not manufacture its own products. As such, its profit margins are lower. However, its wide range of branded products can attract more customers and offer the group a certain level of diversification.
Growth of the technology sector
Along with these two luxury pieces, I would also invest in technological stocks soft cat and Computer center. The tech industry is growing rapidly and I believe this trend will only continue.
These two companies support their clients in the development and installation of computer systems. This means that they are not as profitable as software vendors which is a risk, but they do offer a more diverse option. Software packages can fall out of favor. Technology will not do it. However, this sector is competitive, so these companies will have to remain vigilant to beat the competition.
The last two companies I would buy for my £ 10,000 portfolio are real estate stocks. The UK property market is booming and experts don’t think that will change anytime soon. Limited supply and growing demand will only push prices up, analysts say.
Real estate market
For this, I would invest in Berkeley and Taylor wimpey. The former is a London-focused developer with an average selling price roughly 2.5 times that of Taylor.
I think these two stocks will give me exposure to the real estate market, as well as diversification into different segments of the market.
Unfortunately, their growth could slow down if interest rates rise. This can hurt mortgage demand and discourage consumers from making new purchases.
I think the six stocks above would give me exposure to some of the key market themes, as well as diversification in my £ 10,000 portfolio.
Rupert Hargreaves has no position in any of the stocks mentioned. The Motley Fool UK recommended Burberry and Softcat. The opinions expressed on the companies mentioned in this article are those of the author and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering a wide range of ideas makes us better investors.