Choosing the ASX shares to invest a significant sum of cash in is always a difficult task. There are so many quality options on the ASX alone to choose from. And when you throw in international share markets, the menu can quickly become overwhelming for many investors. But this April, the question of where to invest $5,000 on the ASX has a simple answer for me.
I must admit, I'm a little worried about the state of the stock markets. Both the US markets and the ASX have been knocking over new all-time record highs like dominoes in recent months.
That's been great for investors. But investing in the share market when it is at or near an all-time high is inherently more risky. That's not a dealbreaker in itself, but I am looking at what could potentially be some storm clouds on the horizon right now.
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Do the latest US inflation numbers bode ill for the share market?
Much of the recent rises in both the US and ASX markets have almost certainly been a result of the expectation that we will see a global reduction in interest rates in 2024.
As of today, this is looking far less likely, thanks to some hotter-than-expected inflation numbers out of the United States. As we've just looked at, core American inflation is still running at a spicy 3.8% on an annualised basis. That is well above the 2% that the US Federal Reserve wants to see.
What does this mean for ASX shares? Well, as my Fool colleague Bernd put it, "it could see the official US cash rate stay at the current 5.25% to 5.5% for considerably longer than ASX 200 investors have been hoping".
If the US, and Australia by extension, have to deal with higher interest rates for longer, we could well see increased economic turmoil, not to mention lower stock markets, over 2024.
So how does one invest in this environment?
How to invest $5,000 on the ASX this April
Well, I wouldn't stop investing, or 'go to cash', that's for sure. It is folly to stop investing or to cash out your shares on a whim. However, I'd still be playing it a little safe in April.
Rather than investing in my favourite ASX shares, most of which are still at historically elevated prices, I'd steer more capital into an investment that has proved to be highly durable in the past, while still offering decent returns.
That investment would be consumer staples shares. I love investing in consumer staples shares, thanks to the inherent defensiveness and resilience this sector provides. Consumer staples shares are companies that produce goods that we cannot live without. That's things like food, drinks and household essentials.
A great way to gain exposure to this sector is through an exchange-traded fund (ETF). The iShares Global Consumer Staples ETF (ASX: IXI) is a fund that allows investors to access a broad portfolio of different consumer staples stocks, all under one ticker code.
Some of its top holdings are household names, including Coca-Cola, PepsiCo, Nestle and Colgate-Palmolive.
Given these companies tend to move their products regardless of the economic weather, I think they make for sturdy investments with relatively lower volatility during uncertain times. I would also argue that it's a great time to buy this ETF as well from a pricing perspective.
IXI units have returned an average of 9.57% per annum (including dividend returns) over the ten years to 31 March. But over the past 12 months, investors have banked just 3.67%.
When compared to other ASX shares that are trading at or near record highs this April, I'd much rather stick to a conservative investment like the iShares Global Consumer Staples ETF.
