The Motley Fool

Stock market rally: how I’d invest in cheap UK shares today to make a million

Image source: Getty Images

The recent stock market rally hasn’t changed how I’d invest in UK shares for the long term. After all, the stock market’s price level shouldn’t affect the process of determining how to invest capital.

High-quality companies that trade at cheap prices may be more difficult to find after the recent stock market recovery. After all, the FTSE 100 has gained 10% in the past month.

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...

However, by searching within unpopular sectors and taking a long-term view, it may be possible to build a surprisingly large portfolio over the long run. An investor may even be able to make a million.

How I’d invest to capitalise on a long-term stock market rally

Buying high-quality businesses at cheap prices is how I’d invest to take advantage of a likely long-term stock market rally. The track record of the FTSE 100 suggests UK shares can continue their recent gains to post new record highs over the long run.

In fact, the index has always recovered from its past declines to make new highs. As such, buying UK shares now while the FTSE 100 continues to trade below its 2020 starting price could be a shrewd move.

Of course, not all sectors have gained as much ground as the FTSE 100 over recent weeks. Many industries face very challenging operating conditions in the short run. That means investor sentiment towards them is still comparatively weak. As such, there may be opportunities to buy cheap shares even after recent stock market gains.

Clearly, some cheap shares are likely to be priced at low levels for good reason. For example, they may have weak balance sheets or poor strategies. However, avoiding such businesses and instead purchasing financially-sound stocks with wide economic moats is how I’d invest at the present time. They may be better able to cope with short-term challenges. They may also deliver improving profit growth in the long run and benefit from an upward rerating to their valuations in a long-term stock market rally.

Making a million from cheap UK shares

Making a million from cheap UK shares may sound more feasible to investors after the recent stock market rally. However, it hasn’t changed how I’d invest to capitalise on the long-term growth potential of the FTSE 100 and FTSE 250. Buying high-quality businesses at cheap prices could produce market-beating returns in a likely stock market recovery over the long run.

Even if an investor obtains the same return as the FTSE 100 has delivered in the past from a basket of UK shares, they could build a £1m portfolio in the coming years. For example, investing £750 per month at the FTSE 100’s historic annual return of 8% would produce a portfolio valued at over a million within 30 years.

However, with many cheap, high-quality shares still available to buy, there may be opportunities to reduce the time it takes to build a seven-figure portfolio.

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.