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Here’s how I’d invest £20k in the best shares now to achieve financial freedom

Peter Stephens
·3-min read
Senior Couple Walking With Pet Bulldog In Countryside
Senior Couple Walking With Pet Bulldog In Countryside

Despite the recent stock market rally, a number of the UK’s best shares continue to trade at attractive price levels.

Through buying a diverse selection of them with £20k, or any other amount, an investor can generate high returns in the long run as the stock market recovers.

This may lead to a surprisingly large retirement next egg that provides greater financial freedom in older age via a growing passive income.

Buying the best shares now

Investing money in the best shares now could be a means of reducing risk and improving long-term returns. The most attractive stocks at the present time are likely to be those companies that fulfil two main goals.

First, they have the financial capacity to withstand a period of weak economic performance that may spill over into 2021. As such, companies with low debt, strong balance sheets and competitive advantages may be more appealing.

Second, they’ve the right strategies to capitalise on industry growth trends as the economy recovers. Should they have inflexible business models or outdated strategies, they may face challenging futures.

Clearly, identifying which companies are likely to be the best shares to buy now is very subjective. However, through assessing their quality, it’s possible to find the most appealing companies within a sector. Those that can go on to produce higher long-term returns.

Buying UK shares at cheap prices

Even after the recent stock market rally, many of the best shares in the FTSE 100 and FTSE 250 trade at low prices. Investor sentiment continues to be relatively cautious towards UK shares. This may allow an investor to pick up high-quality businesses when they offer wide margins of safety.

Such a strategy has been very profitable in the past. After all, it uses the market cycle to an investor’s advantage. Since the FTSE 100 and FTSE 250 have always fully recovered from their low points to reach new record highs, there may be added value in buying cheap stocks at the present time.

Of course, this doesn’t mean sacrificing quality to buy cheap stocks. Identifying the best shares to buy now, and buying them at low prices, is likely to mean less risk and higher returns in the coming years.

Investing £20k to obtain financial freedom

Investing £20k in the best shares today could produce a surprisingly large portfolio in the long run. Even if an investor matches the FTSE 100’s historic total returns of 8% per annum, their £20k investment could be worth over £200k within 30 years.

However, through buying the most appealing UK shares at low prices, it’s possible to outperform the stock market. This may lead to a larger portfolio and greater financial freedom as a stock market recovery takes hold in the coming years.

The post Here’s how I’d invest £20k in the best shares now to achieve financial freedom 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