This is how I’m investing £100,000 in the stock market in 2024!

Investing in the stock market can be daunting for many. Here, Dr James Fox explains his choices for the year ahead.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

2024 year number handwritten on a sandy beach at sunrise

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The stock market provided mixed returns in 2023. If I’d have focused on US tech and growth stocks, I’d have done rather well. If I’d have focused on British value stocks, I probably wouldn’t have seen much in the way of returns.

So what could a successful investing strategy look like in 2024?

Diversification

Portfolio diversification is crucial for managing risk and enhancing returns in my investment strategy.

Should you invest £1,000 in Blackrock Energy And Resources Income Trust Plc right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Blackrock Energy And Resources Income Trust Plc made the list?

See the 6 stocks

By spreading my investments across various asset classes like stocks, bonds, and other instruments, I aim to reduce the impact of a poor-performing asset on my overall portfolio.

Bonds, known for stability, provide a counterbalance to the volatility of stocks. Moreover, at the moment, bond yields are way above where they have been for the last decade. It may pay me to buy them and then forget about them.

Diversification helps me achieve a balanced and resilient portfolio, safeguarding against the unpredictability of individual assets and market fluctuations.

Risk exposure

Understanding risk is integral to my investment approach, considering my unique time horizon. Risk is not just about potential losses, but also the possibility of not meeting my financial goals within the set timeframe.

With a longer time horizon, I can afford to weather short-term market fluctuations and capitalise on higher-risk, higher-reward investments. This perspective allows me to navigate the inherent volatility of the market, aligning my risk tolerance with my investment horizon for a more strategic financial journey.

My investing strategy

The notion of the investment time horizon has been very important for me. I’ve been gearing up to buy a house for around 18 months and, finally, we’re getting near.

So why has that been important? Well, it’s shaped my exposure to risk. Requiring a significant deposit, I’ve been reducing my exposure to the more volatile parts of the market.

However, with my house buying capital put to one side, my strategy is changing, and that’s apparent in my stock picks. Simply put, I’m unlikely to need the money I’m putting aside for some time. And this means I’ll be moving £100,000 from strategy A to strategy B.

As such, my exposure to risk is changing, and I’m increasingly investing in growth stocks — a more volatile part of the market.

My favourite metric

Quantitative data should be central to any investment decision. But that’s not always straightforward with growth stocks that can look incredibly expensive using near-term metrics like the price-to-earnings (P/E) ratio.

This is why I really like using the price/earnings-to-growth (PEG) ratio. This is calculated by dividing the forward P/E by the forecasted earnings per share growth rate (three-five years).

A ratio below one tends to suggest the market hasn’t appreciated a company’s growth trajectory. If a company has a PEG ratio of 0.7, for example, it could be inferred that it’s undervalued by 30%.

Of course, I don’t buy stocks just according to their PEG ratios. I look to build a more complete picture. But as some of my recent purchases below highlight, the PEG ratio is key to my investments.

StockPEG Ratio
AppLovin0.61
Celestica0.64
Nvidia0.91
Rolls-Royce0.55
Super Micro Computer0.66

There’s a caveat, of course, and that’s the fact that growth forecasts — which are central to this metric — can be wrong. This is certainly a risk worth bearing in mind.

We think earning passive income has never been easier

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

James Fox has positions in AppLovin Corporation, Celestica Inc, Nvidia, Rolls-Royce Plc, and Super Micro Computer. The Motley Fool UK has recommended Nvidia and Rolls-Royce Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Our best passive income stock ideas

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

If you’re excited by the thought of regular passive income payments, as well as the potential for significant growth on your initial investment…

Then we think you’ll want to see this report inside Motley Fool Share Advisor — ‘5 Essential Stocks For Passive Income Seekers’.

What’s more, today we’re giving away one of these stock picks, absolutely free!

Get your free passive income stock pick

More on Investing Articles

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »