The soaring gold price may convince investors to avoid UK shares to buy the precious metal. However, its high price may mean that scope for similar gains to those experienced so far this year are somewhat limited.
As such, while many FTSE 100 shares currently trade at low prices after the market crash, building a portfolio of high-quality businesses may be a better idea. Here are two such companies that could improve your retirement prospects in the coming years.
A buying opportunity among UK shares
Taylor Wimpey’s (LSE: TW) recent half-year performance highlights the difficulties many UK shares have experienced this year. The housebuilder’s share price is down 42% year-to-date, while its half-year results showed a 56% fall in revenue, due in part to lockdown measures that forced the closure of its sales sites.
Despite this, the company’s prospects appear to be improving as the economy reopens. Its results showed it retains a solid financial position, while government support for the sector is pushing demand for homes to higher levels.
With Taylor Wimpey’s shares currently trading on a forward price-to-earnings (P/E) ratio of 9, the company seems to offer good value for money. As such, now could be the right time to buy a slice of the business as it embarks on a long-term recovery following its recent stock price fall.
Defensive investing potential
United Utilities (LSE: UU) has also recorded a share price fall relative to other UK shares this year. The utility company is down 10% since the start of the year as investors have become more cautious about regulatory change within the water services industry.
Although this could lead to a changed dividend policy for the business, its recent results highlighted a solid operating performance. For example, its underlying after-tax profit increased by 5% despite a challenging period for the wider economy.
This resilience could make it more appealing to investors during an uncertain economic period when other FTSE 100 companies are struggling to maintain sales and profitability.
As such, now could be the right time to buy shares in United Utilities. Its defensive characteristics may mean it outperforms other UK shares over the long run.
Building a diverse portfolio
Of course, building a diverse portfolio of UK shares is crucial due to the insecure outlook for the economy. It can help to reduce overall risks and improve long-term returns for investors who are seeking to retire early.
Therefore, buying United Utilities and Taylor Wimpey as part of a broader portfolio that contains shares from a variety of sectors could lead to outperformance of other assets such as gold.
Over the long run they may offer higher return prospects than the precious metal that improves your chances of building a generous nest egg for retirement.
Peter Stephens owns shares of Taylor Wimpey. The Motley Fool UK has no position in any of the shares mentioned. 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.