The Motley Fool

Forget your State Pension worries! I’d listen to Warren Buffett and buy cheap UK shares

Image source: The Motley Fool

Buying cheap UK shares to build a retirement nest egg may not sound like a worthwhile move at the present time. Risks such as Brexit and coronavirus could cause a further stock market crash later this year.

However, by following billionaire investor Warren Buffett’s lead and purchasing undervalued shares, you could build a surprisingly large nest egg. In doing so, you may reduce your reliance on what continues to be a relatively inadequate State Pension.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Buying cheap UK shares after a stock market crash

Following the stock market crash, there are a wide range of cheap UK shares available to buy. Purchasing them now could mean you benefit from their long-term growth potential. Especially since an economic recovery is likely to take place in the coming years.

Buffett has used a similar approach for many decades. His aim has consistently been to buy high-quality businesses when they are suffering from temporary challenges. For example, a company may have a solid financial position and a competitive advantage over its peers that can produce high profit growth in the long run. However, in the short run, it may be suffering from weak consumer sentiment or challenging economic conditions that will eventually improve.

Certainly, some cheap UK shares deserve to trade at low prices. In some cases, they may struggle to survive what could be a difficult period as the coronavirus pandemic continues. However, investors who have a long-term horizon are likely to have sufficient time for them to post recoveries as sentiment improves and their profitability moves higher.

Building a nest egg to beat the State Pension

While other assets may be less risky than cheap UK shares in the short run, their long-term growth potential may be somewhat lacking. For example, bonds and cash offer low returns due to a loose monetary policy. Meanwhile, high house prices suggest the buy-to-let market may lack value for money.

By contrast, indexes such as the FTSE 100 and FTSE 250 haven’t yet recovered from the recent stock market crash. Within them, many companies with dominant market positions and long-term growth potential currently trade at prices that are significantly below their historic averages. This suggests that they offer wide margins of safety that could translate into high returns in the long run.

As such, buying a diverse range of cheap UK shares could be a sound means of overcoming the State Pension. With it amounting to just £9,110 per year, it is unlikely to provide financial freedom for most people in older age. Therefore, now could be the right time to follow Buffett and buy strong businesses at prices that do not fully reflect their future prospects. Doing so could improve your retirement prospects in the coming years.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.