UK shares fell hard and fast in the stock market crash, but that’s not a worry if you invest regular monthly sums in the FTSE 100. You might even see it as an advantage, because your payment will pick up more stock at the lower price.
That’s just one of the attractions of investing a steady, regular sum into UK shares. It feels safer than investing a lump sum, where you suffer an instant loss if the stock market crashes next day. Another benefit is that after a while, you won’t notice the money leaving your account. Yet it will continue to grow, week after week, month after month, year after year.
Regular investing only works against you when markets are rising. In a bull market, it pays to invest as much as you can, as soon as you can. Given recent market volatility, regular investing looks highly appealing today.
Earn income from UK shares
You won’t make a million by investing £100 a week, but may be surprised to see how much your money rolls up, given time. You’re putting aside £5,200 a year. If you can maintain this over 30 years, you’ll have an incredible £435,769, assuming an average total return of 6% a year after charges.
Say your portfolio of UK shares does even better and returns 7% a year. Then you would have an even more handsome £525,580.
If you invest for 40 years – effectively a working lifetime – you’d have a mighty £1.1m. All of which would be tax-free inside a Stocks and Shares ISA.
Remember to reinvest all your dividends for growth at this stage, rather than taking them for income. By ploughing them back into your stock, you’ll actually be investing more than £100 every week in UK shares. Better still, this will grow over time.
I’d target these FTSE 100 stocks
I’d spread my money between a range of top FTSE 100 companies, to diversify and reduce the damage if one of them underperforms.
You could choose one from the pharmaceutical sector, with income and growth stocks AstraZeneca and GlaxoSmithKline the obvious picks here. I might also include shares from another defensive sector, utilities. National Grid is my favourite here, otherwise Pennon Group and Severn Trent also look tempting.
Other income and growth stocks worth considering include household goods giant Unilever, spirits group Diageo, rental equipment company Ashtead Group, insurer Legal & General Group, or investment trust Scottish Mortgage. You’ll find plenty more UK share tips on The Motley Fool website.
One of the joys of regular investing is that instead of worrying about a stock market crash, you find yourself celebrating it. Naturally, you’ll hope the market recovers by the time you retire. Although if you leave the shares invested and just take the yield, it’s less of an issue.
A balanced portfolio of UK shares should give you the passive income you need to make the most of your retirement.
The post I’d invest £100 a week in UK shares to build a passive income for retirement appeared first on The Motley Fool UK.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, Pennon Group, and Unilever. 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