The Motley Fool

How I’d drip-feed £250 a month into UK shares in an ISA to get rich in a stock market rally

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Image source: Getty Images.

.With UK shares still trading at cheap prices in many cases, drip-feeding money into FTSE 100 and FTSE 250 stocks could lead to impressive returns in a stock market rally.

Certainly, there are short-term risks ahead that may derail the performance of stocks in the short run. However, the track record of the FTSE 100 and FTSE 250 shows that a long-term stock market rally is likely after this year’s market crash. As such, a diverse portfolio of high-quality stocks could deliver attractive performances in the coming years.

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...

A stock market recovery that lifts UK shares

The stock market rally that’s lifted the prices of many UK shares may or may not continue in the short run. The prospects for FTSE 100 and FTSE 250 shares continue to be uncertain. Risks such as Brexit and the coronavirus pandemic could negatively impact on operating conditions and investor sentiment in the coming months.

However, over the long run, a strategy of drip-feeding money into UK shares could pay off. The past performance of the stock market shows it’s always delivered new record highs after its variety of declines. By doing so, it’s produced annual total returns of around 8%. Similar returns could lead to a surprisingly large ISA portfolio value for regular investors in FTSE 100 and FTSE 250 shares.

Regular investing in FTSE 100 and FTSE 250 shares

A monthly investment of £250 in UK shares could lead to a surprisingly large portfolio in the long run. Assuming an 8% annual return, which is in line with the past total returns of the FTSE 100 and FTSE 250, it could produce an ISA portfolio valued at around £575,000 over a 35-year period.

Clearly, not every investor will have £250 to invest each month. Others may not have 35 years available to allow it to grow. However, it may be possible to obtain a market-beating rate of return. That means purchasing today’s high-quality FTSE 100 and FTSE 250 stocks when they trade at cheap prices. They may offer greater scope to deliver capital growth over the long run. Certainly as a stock market rally is likely to continue in the coming years.

Building a solid ISA portfolio

Of course, it’s important to consider risk, as well as potential returns, when investing money in UK shares. A regular investment strategy allows an investor to take advantage of future stock market crashes because they can purchase shares at lower prices. Furthermore, building a diverse portfolio of stocks from across the FTSE 100 and FTSE 250 can reduce risk. That’s because one company’s performance has a relatively small impact on overall returns.

Certainly, the near-term prospects for shares may be uncertain. It’s about investing money regularly in a diverse range of high-quality shares at low prices. By doing that, it’s possible to generate high returns in an ISA in a stock market rally.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US 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

Renowned stock-picker Mark Rogers and his 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 click below to discover how you can take advantage of this.