How I’d invest $10,000 in ASX shares if I were saving for a house

Saving for a house is not an easy task. It can mean saving up tens of thousands of dollars, or sometimes more than $100,000 depending on the goal. Here’s where ASX shares might be able to help.

It’s important to recognise that the ASX share market can be volatile. So, I wouldn’t invest all of my house deposit funds into ASX shares because, of course, they could drop at an inopportune time – such as just when they’re needed to buy a house. For this reason, I would only do it with a portion of the money.

I also want to say that investing in shares is a long-term endeavour. I would not invest today thinking I’d be cashing out in six or nine months. I’d say at least five years is probably the minimum timeframe that could give the shares the chance to grow and allow some leeway to navigate any difficulties during that time.

When the shares are at a good price, at say the four-and-a-half year (or even four years) mark, I would consider whether cashing out slightly earlier would be good to lock in the gains and go back to the safety of cash.

As money expert the Barefoot Investor said in his December 2020 newsletter:

If you have money that you need to draw on in the next five years invested in anything other than a bank savings account or term deposit, you may well lose a chunk of it.

The share market is not a safe place to hold your money in the next five years. However, it’s arguably the safest place to invest your money over decades, as it will outrun inflation.

Keep any money you’ll need to spend in the next few years in a bank account (or term deposit) that is covered by the government deposit guarantee (up to $250,000).

With savings accounts in Australia now offering much higher savings rates, keeping in an account is a much more palatable idea.

Having said all that, if I were investing $10,000 to boost my house deposit these are the types of names I’d consider:

VanEck Morningstar Wide Moat ETF (ASX: MOAT)

I wouldn’t want to put my money into the riskiest ASX growth shares I could find. I’d choose ones that look like they could offer stability and, hopefully, growth over the long term.

The idea behind this exchange-traded fund (ETF) is that it’s invested in a portfolio of high-quality US companies. It has around 50 holdings, which is plenty of diversification.

Analysts at Morningstar have analysed hundreds of companies in the US and picked ones that have wide ‘moats’, or strong competitive advantages, which are expected to endure for at least the next decade and probably endure for two decades. In other words, these businesses are really good at what they do.

Some of the biggest positions in the portfolio right now are: Kellogg, Gilead Sciences, Ecolab, Polaris, Blackrock, Biogen, Etsy, and Boeing.

Businesses are only added to the portfolio if they are “trading at attractive prices relative to Morningstar’s estimate of fair value”. In other words, this portfolio is full of good value, long-term businesses.

This ETF has demonstrated long-term solid performance. Over the past five years, the total return has been an average of 15.7% per annum. But, past performance is not a guarantee of future results.

I would put $5,000 into this ASX share.

Brickworks Limited (ASX: BKW)

This business has four parts, all of which I’m optimistic about.

It has an Australian building products division that makes things like bricks, roofing, and precast. If there is another positive run for the Australian housing market in the next few years, this segment will benefit.

Brickworks also has a growing presence in the huge US building product market, where it is already the leading brickmaker in the northeast of the country. This division could deliver attractive expansion over the long-term as it expands into more states and into more building products.

The ASX share also owns a substantial portion of century-old investment house Washington H. Soul Pattinson and Co. Ltd (ASX: SOL). This large asset provides Brickworks with stable underlying earnings and (growing) cash flow in the form of an increasing dividend.

Finally, Brickworks owns half of a growing industrial property trust along with Goodman Group (ASX: GMG). This trust is building large, advanced warehouses on land that Brickworks no longer needs. Two of the biggest warehouses are for Coles Group Ltd (ASX: COL) and Amazon. This trust could drive a lot of value for Brickworks in the 2020s.

I think Brickworks looks good value when you compare the stated value of net assets to its market capitalisation.

I would invest $3,000 into this ASX share due to its diversified operations and the large pipeline of properties being planned in the property trust.

Wesfarmers Ltd (ASX: WES)

Wesfarmers is another diversified, solid ASX share in my opinion.

It’s the business behind Bunnings, Kmart, Officeworks, Catch, Priceline, Target, and more.

I think that the long-term profitability of some of its little-known businesses, such as Wesfarmers chemicals, energy, and fertilisers (WesCEF), is very promising, particularly with the planned Mt Holland lithium project.

The company is also planning to grow in the health, beauty, and wellness sector after buying API, the business that owns Priceline, Soul Pattinson Chemists, and Clear Skincare Clinics. I think this health area provides a lot of potential areas of growth and can benefit from ageing demographics.

Management has shown over the long term that they try to be careful with the company’s capital and are laser-focused on shareholder returns. I think Wesfarmers could be a compelling long-term pick.

I’d invest $2,000 into this ASX share.

The post How I’d invest $10,000 in ASX shares if I were saving for a house appeared first on The Motley Fool Australia.

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Motley Fool contributor Tristan Harrison has positions in Brickworks and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Brickworks, Etsy, Gilead Sciences, and Washington H. Soul Pattinson and Company Limited. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Biogen and Ecolab. The Motley Fool Australia has positions in and has recommended Brickworks, COLESGROUP DEF SET, Washington H. Soul Pattinson and Company Limited, and Wesfarmers Limited. The Motley Fool Australia has recommended VanEck Vectors Morningstar Wide Moat ETF. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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