Due to the State Pension amounting to just £730 per month, building a retirement nest egg could be a requirement for most people. After all, living off a retirement income that amounts to just a third of the average UK annual salary is unlikely to be sufficient for most retirees.
With the FTSE 100 appearing to offer a wide range of stocks that trade on low valuations at the present time, now could be the right time to buy equities in order to improve your retirement prospects.
Here are two large-cap shares that could provide capital growth, as well as income appeal, over the long run.
The housebuilding sector could remain an uncertain place to invest in the short run, with falling London house prices potentially impacting negatively on the financial prospects for Berkeley (LSE: BKG).
However, the company’s recent updates have shown that it is making encouraging progress with its strategy. It is on track to deliver on its profit guidance over the medium term, while it has a strong position through which it could benefit from any future upturn in the performance of the property market.
Since Berkeley’s shares trade on a forward price-to-earnings (P/E) ratio of just 12, they seem to offer a wide margin of safety. In fact, investors appear to have factored in the risks facing the business through a lower valuation.
The company’s net cash position and its low reliance on Help to Buy for sales could mean that it is able to weather any future challenges better than many of its industry peers. As such, now could be the right time to buy a slice of the business.
Another FTSE 100 stock that trades on a low valuation is Barclays (LSE: BARC). The bank’s forward P/E ratio currently stands at 6.7, which suggests that investors are extremely cautious about its financial outlook.
This stance may be merited. After all, the UK economy faces a period of uncertainty, while risks to global economic growth are high. This may disrupt the wider banking sector’s growth prospects and lead to weaker investor sentiment towards the industry.
However, long-term investors may be able to capitalise on Barclays’ share price weakness. The risks facing the bank may now have been factored into its valuation, while its recent update showed that it expects to make progress in cutting costs over the medium term. This should allow the bank to increase dividend payments, with it expected to yield an impressive 6.3% in the current year from a shareholder payout that is due to be covered 2.4 times by earnings.
Clearly, buying a banking stock could be a risky move in the short run. Operating conditions could worsen, and investor sentiment may become increasingly weak. But for long-term investors, Barclays’ low valuation and improving financial outlook may allow it to post high returns that help to boost your retirement portfolio’s performance.
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Peter Stephens owns shares of Barclays and Berkeley Group Holdings. The Motley Fool UK has recommended Barclays. 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.