Why I’d buy and hold National Grid plc forever

Bilaal Mohamed reveals two of his favourite buy-and-forget investments.

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As investors we know that buying shares and holding them for the long term is one of the best ways to build wealth. But if that is the case why isn’t everybody doing it? Achieving financial independence and retiring early is everyone’s ultimate goal, isn’t it?


Well, unless you’re already fabulously wealthy or well into retirement, the main reason people give for not investing in stocks and shares is risk. But what they really mean is FEAR. And who can blame them? Perhaps now more than ever the Great British public is regularly confronted with headlines of accounting irregularities, bribery and corruption allegations, profit warnings, and failing businesses, all of which frequently lead to share prices collapsing.

Indeed, some of our most prestigious companies have fallen foul of sudden share price collapses in recent times – even big names such as Tesco, BT Group and Next haven’t been immune. And for the average man or woman on the street this doesn’t instil much confidence in the stock market as a vehicle for building long-term wealth.

Sleep easy

As human beings we’re all different. Some of us are happy to take on higher levels of risk in order to achieve far greater potential rewards, while others are less comfortable with the concept of ‘nothing ventured, nothing gained’. More often than not this can mean missing out on some of life’s great opportunities.

Personally, I believe that each investor should seek opportunities within their own personal comfort zone. So for those with a lower tolerance for risk I present two London-listed firms that shouldn’t keep you awake at night. Let’s face it, what can possibly be more important than a good night’s sleep?

Economic immunity

First and foremost, I give you National Grid (LSE: NG). As the largest London-listed utility, the company is responsible for the transmission and distribution of electricity and gas in the UK. With no direct competition to worry about, it could be argued that it’s the lowest-risk company listed on the London Stock Exchange.

The FTSE 100 utility giant rewards its loyal army of shareholders with a biannual dividend that rises at least by the rate of inflation each year. This defensive business is pretty much immune to the political and economic turmoil that we have been facing in recent years, and should continue to be a relatively safe place to park your hard-earned cash. The generous shareholder payouts currently equate to an attractive yield just shy of 5%.

Let it flow

Another utility giant that I’ve long been a fan of is United Utilities (LSE: UU). The Warrington-headquartered business provides water and wastewater services for a captive audience of around 7m people and 400,000 businesses in the North West of England.

As the largest of the three remaining London-listed water companies, United Utilities aims to increase dividend payouts in line with inflation at least until 2020. The share price has fallen back since hitting all-time highs in May providing a great entry point. Just sit back and enjoy a regular flow of income that currently equates to a yield of 4.5%.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Bilaal Mohamed has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.

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