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

I don’t care about buy-to-let or Cash ISAs! Here’s why I plan to get rich buying cheap UK shares in my Stocks and Shares ISA.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

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. 

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.

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.

More on Investing Articles

Investing Articles

1 FTSE dividend stock I’d put 100% of my money into for passive income!

If I could invest in just one stock to generate a regular passive income stream, I'd choose this FTSE 100…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Forecasts are down, but I see a bright future for FTSE 100 dividend stocks

Cash forecasts for UK dividend stocks are falling... time to panic! Actually, no. I reckon the future has never looked…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Down 13% in April, AIM stock YouGov now looks like a top-notch bargain

YouGov is an AIM stock that has fallen into potential bargain territory. Its vast quantity of data sets it up…

Read more »

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Beating the S&P 500? I’d buy this FTSE 250 stock for my Stocks and Shares ISA

Beating the S&P 500's tricky, but Paul Summers is optimistic on this FTSE 250 stock's ability to deliver based on…

Read more »

Passive and Active: text from letters of the wooden alphabet on a green chalk board
Investing Articles

2 spectacular passive income stocks I’d feel confident going all in on

While it's true that diversification is key when it comes to safe and reliable investing, these two passive income stocks…

Read more »

Investing Articles

The easyJet share price is taking off. I think it could soar!

The easyJet share price is having a very good day. Paul Summers takes a look at the latest trading update…

Read more »

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

9 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

As the Rentokil share price dips on Q1 news, I ask if it’s time to buy

The Rentokil Initial share price has disappointed investors in the past 12 months. Could this be the year we get…

Read more »