UK markets open in 6 hours 44 minutes
  • NIKKEI 225

    +658.74 (+2.27%)

    0.00 (0.00%)

    +1.22 (+1.98%)

    +9.00 (+0.52%)
  • DOW

    -469.63 (-1.50%)

    -104.18 (-0.31%)
  • CMC Crypto 200

    -10.11 (-1.08%)
  • ^IXIC

    +72.95 (+0.56%)
  • ^FTAS

    -86.34 (-2.28%)

Why I’m buying cheap UK shares in my ISA and ignoring Cash ISAs and buy-to-let!

Royston Wild
·3-min read
Image of person checking their shares portfolio on mobile phone and computer
Image of person checking their shares portfolio on mobile phone and computer

The global economy is fraught with danger as we edge further into the new year. The continuing public health emergency is the main threat to UK shares in 2021. Though the worsening Covid-19 crisis and returning lockdowns across the globe aren’t the only perils to the stock market recovery.

It might be tempting to run for the hills and forget about investing in UK shares right now. Parking your money in a low-risk Cash ISA, for example, might be seen an attractive option until things blow over. Others might think about investing in stable assets like bricks-and-mortar instead by getting in on buy-to-let.

Neither of these options are things I’ve considered doing. Not even for a second. The interest rate on cash accounts like Cash ISAs are so pathetic that it’s hardly worth bothering. Elsewhere, soaring buy-to-let costs are decimating the returns that aspiring landlords can expect to generate.

Taking a patient approach

Indeed, I’ve continued to buy UK shares in my Stocks and Shares ISA following the Covid-19 outbreak. And I plan to keep building my shares portfolio despite the uncertain macroeconomic and geopolitical environment.

As a long-term investor I’m not concerned about the prospect of more turbulence for the global economy in 2021. I aim to make money over a number of years and buy UK shares with a view to holding them for at least a decade. History shows that stock investors who invest in this sort of time horizon make a chunky average annual returns of 8% to 10%.

This patient approach isn’t the only reason why I’ve kept acquiring UK shares for my ISA, however. The 2020 stock market crash dragged some top-quality stocks down with all the duds. And many robust UK shares like these have failed to recover from the correction. This enables brave investors like me to nip in and build a five-star stocks portfolio at little cost.

2 cheap UK shares on my shopping list

A couple more mega-cheap UK shares I’m considering adding to my Stocks and Shares ISA include:

  • Avon Rubber. City analysts reckon earnings at the body armour maker to rocket 36% this financial year. This leaves it trading on a forward price-to-earnings growth (PEG) ratio bang on the bargain benchmark of 1. I’m expecting profits here to rocket over the next decade as huge geopolitical tensions fuel Western demand for its protective products.

  • B&M European Value Retail. Annual earnings are expected to almost double here this fiscal year. Consequently the discount retailer trades on a forward PEG multiple of just 0.2. Tough conditions for the consumer will keep demand for its low-cost products flying off the shelves in the next few years, I feel. And aggressive store expansion will underpin stunning profits growth at the FTSE 100 firm further out.

As I say, now is a great time to go out and try to get rich with UK shares.

The post Why I’m buying cheap UK shares in my ISA and ignoring Cash ISAs and buy-to-let! appeared first on The Motley Fool UK.

More reading

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Avon Rubber and B&M European Value. 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 2021