Stock investing can be challenging, particularly when picking UK shares. Many investors struggle to earn profits in the stock market, and it certainly isn’t suitable for everyone. Investors should only buy into businesses they understand and never invest more than they can afford.
By sticking to this strategy, I’ve been able to increase my wealth over the past decade. By acquiring a diversified basket of UK shares in sectors I understand, my portfolio’s value has increased. And so has the income it generates. While past performance is no guarantee of future returns, I think by following a similar strategy I can continue to increase my wealth.
Stock investing opportunities
I like to add to my portfolio the type of companies that have a strong competitive advantage and track record of rewarding shareholders. While these qualities never guarantee future performance, they provide some guide as to the quality of the business and its management.
A couple of UK shares stand out to me right now. These are Premier Foods and Centamin. The former’s a food producer that’s spent the last decade trying to reduce debt and improve profitability. After reaching a landmark pension agreement last year, the company’s returned to growth.
Meanwhile, gold miner Centamin has benefited from rising gold prices over the past 12 months. The company’s balance sheet is stuffed full of cash and the stock currently supports a dividend yield of 5.6%.
However, falling gold prices could hit Centamin in the future, while Premier may see profits fall if costs rise substantially, so I’m not going to overlook these risks. But based on the tailwinds that have powered these businesses over the past 12 months, I’d buy them today.
UK shares on offer
Volex and IG are two other UK shares I’d buy today. The former is a world-leading producer of electrical equipment, much of which is protected by patents. The latter has an impressive reputation in the financial services industry. These companies have faced challenges in the past and will continue to do so in future. Nevertheless, they’ve both come through historical difficulties, giving me confidence in their future potential.
Finally, I’ve been buying British American Tobacco recently. Shares in this cigarette giant have plunged over the past two years. Even after this decline, the stock still supports a desirable dividend yield of over 8%. But the market seems to be concerned that declining cigarette sales around the world will impact the firm’s profits and hurt its dividend. This is a challenge the group faces although, so far, it has managed to deal with this headwind. That may not continue.
This isn’t an investment suitable for everyone. But, ethics aside, I’m comfortable with the level of risk of investing here. I’m willing to take on the risk for that 8%+ dividend.
