How should I invest £5k right now? There are plenty of UK shares that look attractive in the current market. The problem is, I’m not sure all are suitable investments.
Take the cinema operator Cineworld, for example. Shares in this business look cheap compared to history, but with all of the group’s theatres closed, its outlook is highly uncertain. Investors can only guess what the future holds for the business. In my opinion, that’s no better than gambling.
So, with that in mind, I’d stick with high-quality blue-chip stocks — companies like Diageo.
UK shares to buy today
Shares in this global drinks giant have suffered this year. The stock slumped at the beginning of the pandemic after the firm warned that the closure of bars would hit sales around the world.
However, in the long term, I’m optimistic about this group’s prospects. While the pandemic might have dented demand for products such as Guinness in 2020, I reckon 10 years from now customers will still be consuming the beverage. That leads me to conclude that, as a long-term investment, Diageo might is worth snapping up.
Other UK shares I’d buy today include banking groups Lloyds and Natwest. I think these are two well-run and well-financed institutions. Even though both banks have reported large loan losses as a result of the pandemic, neither has come close to collapse. In fact, as Natwest recently said, the organisation has too much capital. At the end of its most recent financial period, the lender reported a capital ratio of more than 18%. That’s more than double its required minimum.
I’d buy these stocks as a play on the UK economic recovery. When the recovery starts to gain traction, I think shares in Lloyds and Natwest could rise substantially as investor sentiment improves and they’re allowed to re-start dividend payouts.
Value and income
Two other UK shares I’d buy with £5k are broadcaster ITV and insurer Legal & General.
According to my research, ITV should benefit from an improving television advertising market in 2021. This should lead to improved cash generation for the group. However, despite this improving outlook, the stock remains significantly below the level at which it began the year.
Meanwhile, shares in Legal and General have risen steadily in recent months. The firm’s commitment to its dividend and steady earnings growth have boosted investors’ confidence towards the enterprise. I’m interested in the stock for its income. The group has an excellent track record of returning cash to investors. Today, the stock yields around 6.5%, which looks highly attractive in the current interest rate environment.
When owned as part of a basket of UK shares, I think this financial services giant will provide a steady income for my portfolio.
So, those are the stocks I’d buy with £5k today. These five investments offer a combination of value, growth and income, which I believe should yield an attractive investment return in the long run.
Don’t miss our special stock presentation.
It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.
They think it’s offering an incredible opportunity to grow your wealth over the long term – at its current price – regardless of what happens in the wider market.
That’s why they’re referring to it as the FTSE’s ‘double agent’.
Because they believe it’s working both with the market… And against it.
To find out why we think you should add it to your portfolio today…
Rupert Hargreaves owns shares in Diageo and ITV. The Motley Fool UK has recommended Diageo, ITV, and Lloyds Banking Group. 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.