Danielle Ecuyer reveals where she would invest $10k

Where would you invest $10,000? We spoke to eight finance experts to find out what they would do with such a windfall.

Where would I invest $10,000? Two options are a portfolio with five stocks at $2000 each or one with 10 stocks at $1000 each.

The first portfolio is more concentrated, with each company representing 20% of your total value. In the second, each stock represents 10%. Price movements will have a bigger impact on the total value in the first portfolio than in the second.

Both portfolios contain quality stocks. The first portfolio has stocks that are currently relatively out of favour, and the second has a selection of stocks that I like but are pretty fully valued and can be bought on weakness.

Depending on your risk preference and research, you can adopt one or mix-and-match the following two portfolios:

Portfolio one: CSL (ASX: CSL), Technology One (TNE), Macquarie Bank (MQG), NEXTDC (NXT) and Woolworths (WOW).
Portfolio two: CSL, Technology One, Macquarie Bank, NEXTDC, Woolworths (WOW), Goodman Group (GMG), Xero (XRO), Carsales (CAR), IVV (ETF for the S&P500), and either Commonwealth Bank (CBA) or BHP (BHP) for cyclical exposure.

Some other stocks you could add for more cyclical upticks include Sydney Airport (SYD), JB Hi-Fi (JBH) or James Hardie (JHX), as well as some gold via an ETF (GOLD) as protection in case of a market selldown.

Where I have invested during 2020

The year has been nothing short of extraordinary and unprecedented.

We started February with optimism as the sharemarket was reaching a new high and the bushfires ravaging Australia were finally under control. With the US presidential election eight months away, most investors were blissfully unaware of any event that could derail markets.

Then the one-in-a-100-year event, a global pandemic, led to the sharpest sell-off in all financial markets since 1987. The health response to the virus and global lockdowns brought economic activity to a shuddering halt.

It's no wonder stocks collapsed, but the price falls were probably exacerbated by excessive leverage in the system. The falls were soon reversed with the support of the most aggressive monetary and fiscal stimulus programs the world has ever experienced. The US Federal Reserve has injected five times the amount of liquidity in 2020 than in 2008-09 after the GFC.

So how did I respond to the market's volatility?

In hindsight, I was far too slow to acknowledge the pending impact of the pandemic, but I did sense markets were rolling over, so I sold and booked profits in both my Australian and US share portfolios. I did make some mistakes in selling some of the quality cyclical retail shares like JB Hi-Fi and Shopify in the US.

I think many investors completely misread or underestimated the beneficial impact from government support payments, super withdrawals and the stay-at-home, work-from-home trends on retail stocks with powerful digital platforms.

By early April, my instincts were to start buying again, as I had raised my cash holdings to a defensive position for capital protection. Some of the sales were prudent, others less so in hindsight, but for me capital preservation remains one of my investing aims.

This example shows how the ability to change and adapt to market conditions is part of becoming a more experienced investor.

I went into the March crash with a heavy weighting in healthcare stocks (CSL, ResMed and Cochlear), infrastructure (Sydney Airport and Transurban); property REITs like Goodman Group, Charter Hall and Waypoint (formerly Viva Energy REIT), Macquarie Bank, technology shares Appen, XERO, Altium, Technology One and NEXTDC; industrial shares such as Amcor and Ansell; and gaming share Aristocrat.

The only significant sales were Transurban and Sydney Airport, which I sold early to book profits and I have since only added some Transurban. I have also bought into the more defensive companies such as Woolworths, Coles and recently Wesfarmers.

I own a small amount of Commonwealth Bank shares, but I am a not a buyer of the banks generally. Macquarie Bank is more of an asset manager. In my opinion, the banks' business models remain fundamentally challenged with lower-for-longer interest rates and digital disruption.

I did own ZIP and Afterpay but sold, booking some good profits at the entry of PayPal into the buy now, pay later sector.

While I am not bearish on the sharemarket, investors need to monitor shares, as there is quite a lot of speculative or hot money from retail investors, particularly in the small to mid-cap area and in some themes, such as e-commerce, biotech exposed to the virus 
and the buy now, pay later sector.

Investors should also be aware that any signs of inflation could cause a switch from growth, technology and defensive shares into more cyclical companies in the resource, banking, airline and travel-related sectors. To barbell the portfolio for a possible reflation trade I own some BHP, CBA and Fortescue Metals.

I am using my cash holdings to top up shares during periods of weakness. Sharemarkets are likely to remain volatile into the US presidential election and potentially after if either Republicans or Democrats contest the results.

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