Jessica Amir reveals where she would invest $10k

By

Published on

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

The Aussie market is in record high neighbourhood, after steadily rising over the past 18 months. In that time the market has only fallen twice: in September last year and in September this year.

Traditionally, September is the worst month for shares, and 2021 has been no different, with the ASX falling more than 3%. While it may be a treacherous time for some, others use it as an opportunity to buy shares at cheaper prices before October, when the market has historically risen about 1% on average.

where to invest $10k jess amir semi conductors lithium logistics

September is traditionally the worst month for shares because most dividends are paid then, and investors usually take profits after receiving their dividends. Also, it's the end of the quarter, so we often see investors rebalance their portfolios,  selling or taking profits from shares that have done well in the quarter, and buying underperforming ones from the past three months.

This is one of the reasons why tech shares, which performed strongly from July to September, have been sold off. On the flipside, investors have been buying oil shares, as the energy sector is one of the worst performers this quarter.

All in all, the Aussie sharemarket is also likely to rebound as the economy reopens and takes flight once airlines hit the tarmac. Meanwhile, the market thinking is that the most upside could come from industrials and financials.

Industrials shares, such as airlines, travel, tourism and engineering, are expected to see 15% earnings per share growth in 2022. And financials, including banks and insurers, are also being upgraded - they're tipped to see earnings per share growth of 7.5% in 2022.

The elephant in the room is the heavyweights - buy now or invest later? We must be mindful that markets have fallen more than expected, because the biggest miners in the world and on the ASX (iron ore shares) have taken a beating with the very ugly stick, for two main reasons:

First, the iron ore price has fallen dramatically - over 40% from its high - dragging down the biggest iron ore companies, including BHP, Rio Tinto and Fortescue Metals. This drop occurred after China announced it aimed to curb carbon emissions by cutting back on steel production and slammed the breaks on buying iron ore.

The second reason the iron ore price has fallen out of bed is that China's biggest property developer, Evergrande, is going broke. Big spill-over reactions, therefore, dragged the overall iron ore price down as the property developer is a huge consumer of steel and by extension iron ore.

As a result, over this quarter, Fortescue Metals (ASX: FMG) has  fallen over 35%. Aussie-listed Rio Tinto (RIO) and BHP (BHP) fell more than 20% each. Some see this as a buying opportunity, remembering that markets move in cycles.

At some point the iron ore price could slowly rebound. So, patient investors have already started buying the dip. If you are a patient long-term investor too, you could greatly be rewarded in the long run.

Importantly, these miners are not just one-trick ponies. The juggernauts are investing in clean energy to diversify and future-proof their businesses. Fortescue, for example, is investing and working toward generating hydrogen power, and is also making its truck fleets electric in a bid to be carbon neutral by 2030.

Meanwhile, BHP is invested in uranium, which will see increasing demand following the Australian, UK and US program to build nuclear-powered submarines in Adelaide.

Finally, there's Rio Tinto, which is  investing $US2.4 billion in creating one of the world's biggest lithium mines to cater to the undersupplied lithium market, which is seeing skyrocketing demand, thanks to the switch to electric cars.

Where I would invest $10,000

The trick to stock picking is to develop a consistent approach. My approach is to look for opportunities and trends that will gain traction over time (the next five to seven years).

For example, I like lithium, as demand is increasing for its use in electric car and computer batteries; semiconductors, as there is a chip shortage given rising demand for computers and electric cars; and banking, as lending and savings increase as the economy recovers.

With $9000, I'd invest $2250 each in four major trends: logistics, banking, semiconductors and lithium.

For logistics I'd invest in the port and shipping container business Qube (QUB); for banking I'd invest in the investment manager, bank and infrastructure group Macquarie (MQG); for semiconductors I'd invest in the ETFS Semiconductor ETF (SEMI) and for lithium I'd invest in Orocobre (ORE), the world's fifth largest lithium company.

Or there's the ETFS Battery Tech & Lithium ETF (ACDC).

For the $1000 left over as a buffer, I'd invest in the iShares Core Composite Bond ETF (IAF), the largest bond ETF on the ASX, or I'd keep $1000 in cash and use it to top up my shares when they pull back.

Get stories like this in our newsletters.

Related Stories

Jessica Amir is an Australian markets strategist with Saxo Capital Markets. She has more than 14 years' experience in financial markets.
Comments
Moira Maiava
December 8, 2021 9.48am

Thanks for the great article.

I just have a query about a couple of your recommendations:

I couldn't find Orocobre (ORE) or ETFS Battery & Lithium ETF (ACDC) on my broker's website.

Can you suggest why that might be?

Thanks