Lately, the FTSE 100 index of leading UK shares has been performing well. So well, in fact, that it hit a new all-time high in recent weeks.
Understandably, that ought to give investors pause for thought. Might British shares now be overvalued, possibly even heading for a crash?
That is, as always, a possibility – just as it is also a possibility that prices will rise even further from here.
Whatever happens to the flagship blue-chip index, I see several reasons to believe that there could still be money to be made from investing in UK shares.
A market of individual shares
The FTSE 100 tells us what a collection of shares in the country’s largest companies is doing.
But it does not tell us how each of those individual shares is performing, let alone those outside the FTSE 100.
For example, consider Diageo (LSE: DGE), a longstanding FTSE 100 constituent. Its shares have had a miserable 2025 so far. They have also performed woefully over the past five years.
That does not necessarily mean that Diageo shares are not overvalued. No matter how far down a share goes, it can still go down further (until it hits zero, that is).
Diageo clearly has challenges, from weak demand for premium spirits in key markets to a longer-term trend of younger consumers shunning alcoholic drinks.
Still, it is among the UK shares I have been buying this year precisely because I see it as undervalued from a long-term perspective. It is massively profitable, has a stable of premium brands, and a demonstrated expertise in building brand loyalty.
Dividends also matter
Another way in which I think there is money to be made from owning UK shares in the current market is due to the power of dividends.
FTSE 100 shares alone pay out well over £1bn per week on average in dividends.
Dividends are never guaranteed to last. But many companies pay them regularly for decades.
In fact, some firms even raise their dividend per share annually for decades. Diageo is one such share – and its 4.5% dividend yield is currently well above the FTSE 100 average.
Building in a margin of error
With the stock market in clover, it can also be helpful to remember some words of wisdom from billionaire investor Warren Buffett.
He takes a long-term approach to investing, aiming to buy shares in what he sees as great businesses at attractive prices, then holding them for years or decades.
Along the way, of course, share prices may move around considerably.
When valuing shares, Buffett always tries to build a ‘margin of safety’ into his calculations.
Doing that means that, even if the share experiences some steep price falls while he holds it, as long as his long-term investment thesis about the company has not changed, he need not lose sleep over it.
