If I had £10,000 to start investing in FTSE 250 shares today, what would I buy?
Smaller companies in the FTSE 250 can be riskier than their bigger cousins in the FTSE 100. For that reason, I’d definitely want some diversification.
I’d still only buy companies I really like though. I wouldn’t buy anything I considered so-so just to make up the numbers.
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Choosing 10
Spreading my £10,000 across 10 different shares, I reckon I’d get good diversification without paying too much in fees. Taking a look through the mid-cap shares in the FTSE 250, I think I’d be happy to hold the following 10 for at least 10 years.
| Company | Recent price | Forecast P/E | Forecast dividend |
| Man Group | 243p | 7.3 | 5.2% |
| Direct Line Group | 208p | 9.8 | 12% |
| Murray Income Trust | 797p | 5.3 | 4.5% |
| Bellway | 1,919p | 6.1 | 6.6% |
| ITV | 63p | 5.8 | 8.0% |
| Royal Mail Group | 223p | 6.1 | 8.5% |
| Primary Health Properties | 128p | 13 | 4.9% |
| Supermarket Income REIT | 115p | 8.7 | 5.1% |
| Synthomer | 168p | 6.2 | 7.4% |
| Darktrace | 363p | n/a | n/a |
Long-term housing
I would definitely want a FTSE 250 housebuilder. In the long term, considering our perpetual housing shortage, I don’t see how they can lose. And when stocks are run down and looking cheap, isn’t that the best time to get in?
More analysis is needed. But the valuation and dividend prospects make Bellway a strong candidate. As possible alternatives, I’d consider Redrow and Vistry Group (formerly Bovis Homes).
Finance is key
I’d also want a bank or insurance company. The financial sector is a foundation of the economy, and I think should do well in the long run. Direct Line is is my pick here. Direct Line shares are down 30% over the past 12 months, and might have further to fall. But to buy now and not touch for 10 years, they’re in.
I’ve also added hedge fund manager Man Group as I think the investment management industry has been pushed down too far.
Risk-spreading investment trusts
I would never be without an investment trust. They provide diversification in a single investment. And they can help provide safety too.
I’ve gone for UK-focused Murray Income Trust, which has raised its dividend every year for 49 years in a row. The current 4.5% yield looks attractive. Possible alternatives include Alliance Trust and Bankers Trust. They’re both global in outlook, and they’ve both increased their dividends for 55 years.
I’ve also included two real estate investment trusts (REITs) that I see as good value now, Primary Health Properties and Supermarket Income REIT. I might be a bit heavy in real estate, so maybe I’d swap out one of those for Alliance or Bankers.
Risky choice
Wait, what is Darktrace doing in an otherwise conservative portfolio? The cybersecurity specialist is a pure growth share punt, and I’m happy to dedicate a maximum of 10% to that kind of investment. The shares are down 60% in 12 months, so the risk must be lower now.
There are risks in all of these picks, and I wouldn’t buy any without further research. But this looks like a good starting line-up to me.
