Analysts at Morgan Stanley and Goldman Sachs believe that UK shares are trading at massive discounts. I’m in agreement with these experts and I’m planning on buying quality shares at discount prices to boost my holdings before sentiment improves and any bull run occurs.
Why are UK shares struggling?
Before I dive wallet-first into my strategy, I think it’s wise to provide a bit of context as to what’s happening.
- Economic difficulty. You’ve probably read lots about this already, but the reality is that soaring inflation and rising interest rates have essentially pushed down most UK shares. This is because there is fear of a recession as well as other issues, like a housing crash and the cost-of-living crisis that has emerged as an unwanted byproduct.
- Government policy and Brexit. A disastrous mini-budget and Brexit haven’t helped. The economy has faltered even more at a time when foreign interest in the UK had cooled due to uncertainty around the UK’s future prospects for investment. Due to this, stocks struggled and have headed downwards.
- Geopolitical tensions. The unfortunate events in Ukraine have hindered global markets, not just UK shares. Although I’m hoping for a speedy and peaceful resolution, the impact of the conflict has reached far and wide, including global markets.
In my opinion, the bargain bucket of UK shares is sizeable. Surely there’s some decent stuff in it?
I’m following two key principles in my approach.
- Keep calm and carry on investing! When the markets are volatile, and share prices and indexes move around a lot, even in a day, it’s easy for panic to set in and to start hitting the “sell” button. It’s an easy mistake to make. But I’m a big advocate of buying and holding for the long term. I will buy and hold a stock for five to 10 years unless something major happens to the business.
- Do your homework! There’s a sentence that brings back memories of my youth. But, it’s one of the best pieces of investing advice I was given. I’ll sit for hours, days, and even weeks, researching a business, a sector, and competitors before I buy a stock.
What I’m doing now
I’m looking to boost my passive income through UK shares paying consistent dividend yields. I already own shares in a few real estate investment trusts (REITs). These are property businesses that must pay 90% of profits to shareholders. Two REITs I own are Warehouse REIT and Primary Health Properties. I’m planning on buying up more shares when I can.
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Next, I’m a fan of defensive stocks. These are businesses that provide essential services no matter the volatility or economic outlook. One stock I’m targeting is National Grid, which owns and operates the electric and gas transmission system in England and Wales. After all, everyone needs energy. When I have some cash to invest, I’ll buy some cheaper-than-usual National Grid shares.
To conclude, I understand that identifying the best UK shares is not an easy feat. I’m going to continue to carefully monitor the macroeconomic environment, stick to my principles, and try to boost my wealth by snapping up some quality stocks at excellent prices.