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£5k to invest? I’d buy crashing UK shares in a Stocks and Shares ISA today to retire early

Peter Stephens
·3-min read
Arrow descending on a graph portraying stock market crash
Arrow descending on a graph portraying stock market crash

Investing money in a Stocks and Shares ISA has been a popular means of improving your retirement prospects for many years. The stock market has generally offered relatively high returns, with UK shares offering long-term growth that could allow you to build a surprisingly large nest egg.

Of course, the stock market crash may have changed the views of investors in the short run. There may even be a further decline in the coming months. However, buying undervalued shares for the long run continues to be a sound retirement plan. And that could be more attractive than ever after the stock market’s recent decline.

Buying crashing UK shares today

One of the challenges facing Stocks and Shares ISA investors is looking beyond the short-term challenges facing the economy. Risks such as Brexit and coronavirus can cause investors to avoid purchasing stocks while they offer wide margins of safety. That’s due to the potential threat of paper losses in the coming months.

However, the stock market’s past performance shows it has always recovered from such risks to post new record highs. For example, it has delivered high single-digit annual returns in recent decades despite a variety of downturns.

Therefore, investors who can buy shares when they offer wide margins of safety have the greatest potential to make capital gains. They’re purchasing stocks at a discount to their intrinsic values, which can lead to market-beating performances in the long term.

Investing money in a Stocks and Shares ISA

With it now being cheaper and easier than ever to open a Stocks and Shares ISA, it could prove to be a perfect vehicle through which to benefit from the stock market’s growth prospects. An ISA can be opened online in a matter of minutes. Meanwhile, annual charges are often less than the cost of a single trade. This makes them extremely accessible to small and large investors alike.

Furthermore, the tax outlook for the UK means ISAs may become even more valuable in future. The cost of coronavirus may be passed on to UK taxpayers in the form of higher taxes. And pension contributions are being mooted as a potential area of interest in this regard. With ISAs offering up to £20,000 in contributions that can be withdrawn without penalty each year, they also offer greater flexibility than other retirement products.

Retiring early on a passive income

Clearly, it’ll take time to build a Stocks and Shares ISA that’s big enough to generate a passive income in retirement. However, the outlook for your retirement plans could be improved through buying high-quality businesses when they trade at low prices. With the stock market crash having caused such a scenario, now could be the right time to start that process with £5k, or any other amount. It could bring your retirement date a step closer.

The post £5k to invest? I’d buy crashing UK shares in a Stocks and Shares ISA today to retire early appeared first on The Motley Fool UK.

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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.

Motley Fool UK 2020