In the modern world, a lot of focus is put on getting things done quickly. This carries over into investing, with people keen to get-rich-quick or invest in assets that are extremely volatile. But there’s a good argument to be made for investing in top UK stocks and holding them for the long term. Holding a stock for life can give you a greater chance of making large profits than speculating on volatile assets on an intraday timescale can.
Long-term investing via a Stocks and Shares ISA
One initial perk of using a long-term strategy is that you can really maximise the benefits of a Stocks and Shares ISA. This is a tool offered by the government that means you don’t have to pay capital gains tax when you sell the stocks. And leaving them in your ISA for as long as possible means profits can accumulate via share price appreciation. When you want to realise this profit (maybe on retirement), you’re able to enjoy 100% of the gains. In theory, the longer you hold a diversified investment portfolio, the larger the profits should be.
Top UK stocks
Having established that an ISA helps when you have a long-term mindset, let’s look at what we can include within it.
I’d be keen to add some stocks that are well established. This reassures me that the firm has a track record and has seen out previous recessions successfully. To that end I’d buy HSBC and Legal & General. Both operate within financial services and have been around for many decades. Even though HSBC has been going through a tough time recently involving a large restructure, it doesn’t overly concern me. This is because of the timeframe I’m looking at. A long-term view enables me to look past the next couple of years, to the next decade and beyond. Using that timeframe, both financial firms look like appealing buys.
The same theme of a proven track record translates through to my next two picks. The difference here is that I want to incorporate some topical relevance to buying right now. Given the impact of the coronavirus, pharmaceutical firms are heavily involved in trying to find a vaccine, either directly, or indirectly. The bottom line is that this industry could perform well in the short term, while still ticking the longer-term box. GlaxoSmithKline and AstraZeneca are two good examples here.
Finally, I’d look to buy a top UK stock that has long-term appeal and is paying out a high level of income. British American Tobacco is my choice here. It currently has a dividend yield of 8.24%, with no sign that the firm is looking to cut or halt the dividend. This would add dividend income to the overall portfolio, but without adding a large amount of risk that can arise when targeting some high-dividend-yield firms.
Investing, not trading
The above ideas are built for the long term, and focus on investing rather than trading. In my opinion, this is a safer way of trying to generate profits for retirement.
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jonathansmith1 has no position in any of the shares mentioned. The Motley Fool UK has recommended GlaxoSmithKline and HSBC Holdings. 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.