Investing in UK shares is a great way to build the money you need to fund a comfortable retirement. Now could be a good time to buy them, as the FTSE 100 is still trading 20% lower due to the stock market crash.
If you are 40 or 50 years old and have little or no retirement savings, you need to get cracking. This is a good opportunity to pick up top UK shares at bargain prices. If we get a second market crash, that could actually work in your favour by making them cheaper.
The world’s most successful investor, US billionaire Warren Buffett, has always urged investors to take advantage of moments like these. As he once said: “Widespread fear is your friend as an investor because it serves up bargain purchases.”
I’d buy undervalued UK shares
Right now, many UK shares are trading at significantly reduced valuations. Some are very, very cheap, for example, in the travel and banking sector, which have been exposed to the full force of the pandemic. Be careful around these. The outlook remains risky.
I wouldn’t take big chances right now, given that you can find solid FTSE 100 and FTSE 250 stocks trading at reduced valuations. Personally, I think the housebuilding sector is a good source of bargain UK shares. Pharmaceutical companies, such as AstraZeneca and GlaxoSmithKline, consumer goods specialists Unilever and Reckitt Benckiser Group, and spirits giant Diageo are all high on my watchlist.
You could wait until economic conditions are more settled before buying, but the danger is you’ll miss those bargain prices. By delaying, you’ll also miss out on the dividend income paid by your chosen UK shares.
Get rich and retire early
Buffett is clear on the importance of taking your chances when they arise: “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble.”
I’d be looking for solid UK shares that have been sold off in the market crash. Then I’d aim to hold them for a minimum of five years but, ideally, far longer. That allows you to build the income you need to fund an enjoyable retirement.
As Buffett put it: “We’re buying businesses to own for 20 or 30 years. We think the 20- and 30-year outlook is not changed by the coronavirus”
If you are in your 40s and 50s, I wouldn’t hang around. You need to start saving right now. The good news is that there are plenty of bargains out there. That’s why I’d go shopping for bargain-priced UK shares today, rather than wait to see if they’re cheaper tomorrow.
If the market does crash again, I know what I’d do. Buy more UK shares. Then sit back and wait for markets to recover, as history shows they always do in the end. It’s what Buffett’s been doing for decades.
The post No savings at 50? I’d follow Warren Buffett’s advice to get rich from UK shares appeared first on The Motley Fool UK.
Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo, GlaxoSmithKline, 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