What shares would you buy with $10,000 today? It's a great question, and one I have been asked more and more recently. This tells me that there are a lot of other Foolish (capital 'F') investors out there. People who see this bear market as an opportunity. Especially in this low interest rate environment, there are some great dividend shares smashing the returns of bank deposits.
In saying this, if you're a first time investor there are a few more considerations. Since you don't currently own any shares, building a diversified portfolio quickly is important. More so now then ever. This is as individual companies become susceptible to supply chain issues, travel bans, store closures and a weakening economy. Another important consideration would be your personal risk tolerance – if you're buying your first shares, I would tend to move the needle slightly more to the conservative side.
With all this in mind, below is how I would consider spending my first $10,000 on the ASX today.
Diversification
Finding diversification within $10,000 without spending $1,000 on 10 companies and getting smashed in brokerage fees leads us to an exchange traded fund (ETF). These are a great way to gain exposure to a market or sector and trade just like normal shares on the ASX.
I would consider a fund such as BetaShares Australia 200 ETF (ASX: A200), which gives exposure to the 200 largest companies on the ASX, or Vanguard Australian Shares Index ETF (ASX: VAS), which gives you exposure to the 300 largest. Both of these funds have small management costs of 0.07% and 0.1%, respectively.
I would allocate half or $5,000 to one of these to make a solid foundation for your portfolio.
Individual ASX shares
For the other $5,000, I would split it into 2–4 trades buying individual ASX shares. There may appear to be a lot of value on the ASX at the moment as companies trade for fractions of their February prices. However, remember some companies will be materially impacted while others will remain largely unimpacted once we are through the other side.
ResMed Inc (ASX: RMD)
One ASX share which has so far remained largely unimpacted is the healthcare devices manufacturer ResMed. ResMed designs and manufactures solutions for the treatment of sleep apnoea and other chronic respiratory illnesses. It also made it onto UBS' top picks to buy in this recession. I would have to agree with UBS, seeing it as a more defensive stock to sail these turbulent waters.
Altium Limited (ASX: ALU)
Altium is another share I would add to the portfolio. It has been sold off with the broader market, however I believe its future remains bright. Altium develops software to design printed circuit boards. It has a fantastic balance sheet, no debt and a large pile of cash. This means it should be able to continue through and see the other side of this coronavirus crisis.
Other ASX share options
I wouldn't recommend dividing the remaining $5,000 (after your ETF investment) into too many parcels. As mentioned previously, any more than 2–4 individual companies would mean you're spending around 2% just on trading costs, which is something you want to minimise.
