Buying UK shares can feel like navigating a minefield at the moment. Businesses and whole industries have been impacted by the pandemic in ways that were once unimaginable.
However, for the prudent investor, now could be a great time to buy UK shares. The FTSE 100 has fallen by 18% in the year-to-date. Therefore, I believe it is possible to buy shares in quality companies that should benefit from the economy’s likely recovery.
Here’s where I’d start.
Investing with smaller sums
If you’re investing with smaller sums, you might struggle to build a well-diversified portfolio.
Diversification is especially important at the moment when it’s difficult to predict how different businesses will react to the coronavirus after-effects.
Although it’s difficult for investors to build up a diversified portfolio with small sums, it can be done by investing in an index fund. Index funds aim to track the performance of a chosen market. UK investors could buy shares in a fund that tracks the FTSE 100, for example. You can usually do so with a modest lump sum, such as £100. This will create diversification with ease.
If you invest at regular intervals, you can take advantage of the markets cycles by pound-cost-averaging. This means your money would be invested at both the high and low points of a market cycle.
Although I think index fund investing is a great way to buy shares with low sums, to supercharge your returns, it might be best to buy individual shares.
A great UK share to buy?
When I think of great UK shares, there is always one company that springs to mind. That company is Unilever (LSE: ULVR), with fantastic brands in its portfolio such as Marmite, Ben & Jerry’s and Lynx.
The reason why I rate Unilever shares so highly is due to the low-cost nature of its products. When times are tough, I’m convinced that people will still be purchasing these goods.
This brand loyalty also offers Unilever another benefit. The company can nudge up the prices of its goods, improving profit.
In its latest results, released in July, the company reported that underlying sales fell by 0.1% in the six months to the end of June. Although this might sound disappointing, it was better than the market predicted. The disruption from the closure of restaurants, cinemas and pubs was offset by a surge in sales of goods that can be consumed at home.
As fellow-Fool Paul Summers notes, performance in North America was a highlight for Unilever, with underlying sales growth in the region hitting 9.5% in Q2
With its better-than-expected results, I was a bit surprised to see that its price-to-earnings ratio is just under 20, even though its share price has jumped by roughly 5% in the year-to-date. For that reason, I believe that right now offers a chance to buy shares in this great UK company at an irresistible price.
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T Sligo has no position in any of the shares mentioned. The Motley Fool UK has recommended Unilever. 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.