Diversify for a year and invest £500 per month in shares

Diversify for a year and invest £500 per month in shares
  • Decide which industries will recover first
  • Choose a number of different types of business
  • Plan ahead for the full year

The stock market has suffered some of its worst days in history in the last month. The FTSE 100 enjoyed three days of gains this week, but at the time of writing it is hovering just over 5,500 points.

Investors are selling their shares in a panic. But this could be an opportunity for you get some bargains. If you have £500 to invest each month, why not diversify and make 2020 the year that you build up a varied portfolio.

Look for industries with a strong future 

Right now, just about every sector has been hammered by the coronavirus crisis. This means that you can cheap shares in just about every sector. However, that doesn’t mean that they are all smart purchases.

You need to some research into which industries are likely to bounce back. Since you are buying shares each month, the priority is to buy those with the quickest hopes of recovery first of all.

This could mean looking at technology firms. They shouldn’t suffer too much in the long term and might end come out of this stronger overall, as more people work from home or seek their entertainment online from now on.

Look at the example of Facebook (NASDAQ: FB). At the start of 2020, their share price was almost $210 (£171.0 or so). Now, it is at $163.34 (£133.23).  Is this drop really justified? They have under-performed the NASDAQ in general this year. The truth is that more people using the site doesn’t make them money or increase their value. Advertising does this.

Mark Zuckerberg has already confirmed that advertising income is down substantially. It will take some time for this to recover, as companies slowly get back to normal. So Facebook should recover but it may take longer than you think.

Look for solid companies

People look for names they can trust at times like this. This means turning to shares in giant, diversified companies like Procter & Gamble. Their share price has tumbled from over $120 (£96.58) at the start of 2020 to as low as under $100 (£80.48).

Their recovery appears to have already started and they could get back to their previous sort of value quite quickly. So this is one share to look at buying at the start of your plan. This is the sort of the giant, profitable company that you can keep in your portfolio for years.

Buying shares like this is a good move for your retirement too. With the price now lower than before, your £500 each month might get an extra share when compared to the price last year.

Look ahead

Since you are investing £500 every month for a year, you need to plan ahead. By the time you get half-way through it, the stock market might have bounced back. It might have fallen further or it could have taken on a new shape.

Now more than ever, it is the time to carry out solid research. Find out which companies have the underlying strength to make their shares a good value investment. If you do this, then there is never a bad time to get involved in the stock market.

By Robert Bell
Having worked for years in the UK banking industry, I began writing and reporting financial markets after migrating abroad to Bolivia. My interests include learning new ways to make money and learning to speak Spanish.
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