I recognize that investing in UK shares can be a daunting prospect, especially at a time like now when inflation has been high for some time, and the economic outlook is rather uncertain.
However, with volatility comes opportunity, in my opinion. Here’s how I’m approaching the New Year and beyond.
My approach
Some seasoned investors reckon buying stocks during times of volatility can be a smart move. This is because stocks are trading cheaper than usual and this can often present the chance to get more for my hard-earned cash.
Let me break down my approach.
- Despite the current volatility as well as tragic geopolitical events, it’s important to remain rational about my investments and stay calm! An example of doing the opposite of this is buying and selling erratically when the market dips or spikes suddenly.
- Investing is personal to each and every person. My choices depend on my circumstances, what I’m looking to achieve as well as my needs and tolerance for risk.
- I reckon a shrewd investment is to make the most of tax relief! I can do this by buying UK shares as part of a tax-free Stocks and Shares ISA. Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
- I forward-plan my investing and money I’ll allocate towards investing. For example, I earmark a certain amount each month towards boosting my holdings, rather than taking a scatter gun approach to buying.
- Research and due diligence are vital. This is in relation to specific stocks as well as the wider sector they operate in. It is also worth considering competitors of each respective stock to ensure you’re buying the right one.
- Diversification is important. I ensure I don’t own too many stocks in the same sector. This can help if one area is struggling and another burgeoning sector can offset this weakness.
Sectors and stocks I’m targeting
- Banking and financial services. These stocks have suffered during the downturn due to economic turbulence. I reckon once any recovery occurs, they’ll soar as well as provide consistent returns. I’ve got my eye on the major UK banks, such as Lloyds Banking Group.
- Renewable energy. A focus on the need for alternatives to fossil fuels has made for an interesting time in this area. The fact these stocks are often backed by government subsidiaries and funding can help firms towards an upward trajectory. One stock on my radar is Greencoat UK Wind.
- Online gaming. Some stocks have fallen due to the cost-of-living crisis and look good value for money. I think once volatility subsides – and consumers have more cash – these firms could experience better performance. Plus, I’m excited to see what could happen across the pond as US states continue to legalise gambling. One stock I’ve been considering is Entain.
- E-commerce. Online shopping has soared in recent years and many firms have done well from it whereas older businesses with a focus on physical stores have struggled and even gone bust. It’s worth noting some businesses in this area have struggled recently too, namely boohoo and ASOS!
This is how I’m looking to approach UK shares in the New Year to help me bolster my portfolio.
