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65% of investors predict “tougher” 2021! Here’s how I’d buy UK shares today

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News flow surrounding a Covid-19 vaccine has raised hopes that the fight against the pandemic has turned the corner. It provides light at the end of the tunnel, sure. But it doesn’t mean UK share investors should take their eye off the ball.

A huge number of share pickers are indeed bracing for tough times in the months ahead. And if a recent survey from HYCM is to be believed, it seems a lot of UK shareholders believe the short-term outlook for the domestic economy is pretty grim.

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Of the 885 UK share investors the trading giant interviewed, a whopping 65% reckon “the effects of Covid-19 on the UK economy will be harder felt in 2021 than they have been this year.” As a consequence, six out of 10 of these investors “plan to adopt a conservative investment strategy by focusing on security rather than returns” in the coming 12 months, HYCM says. And 62% will wait until a vaccine is rolled out before making any major decisions.

Graph Falling Down in Front Of United Kingdom Flag

Reasons to be careful

The Covid-19 outbreak has been devastating for the global economy, of course. But things have been nightmarish for Britain which is dependent on services to drive GDP. It’s why the UK has been one of the worse hit of all the major economies in 2020, and why unemployment is tipped to surge to 7.5m by the middle of next year.

News of harsher lockdowns in parts of Britain, including London, doesn’t inspire confidence either. Nor do fresh surges in total Covid-19 infection rates. Unless an effective vaccine is rolled out fast, then 2021 could indeed prove to be much, much worse for some UK share investors.

3 ways I’d buy UK shares today

Things might be looking grim short-to-medium term. But it doesn’t mean UK share pickers need to pull up the drawbridge and stop investing altogether. They can adopt a variety of strategies to protect themselves and make big profits in 2021, including:

  • Investing in defensive stocks whose profits remain stable during economic upturns and downturns. Companies like this include water supplier United Utilities Group, telecoms giant Vodafone Group, defence contractor BAE Systems and healthcare provider AstraZeneca.
  • Getting exposure to UK shares whose profits actually rise during tough times. Examples include pawn shop operator Ramsdens Holdings, alcoholic beverage maker Diageo and insolvency litigation financier Manolete Partners.
  • Investing in companies which have little-to-no geographic exposure to the UK. This could include life insurance giant Prudential, fast-moving consumer goods giant PZ Cussons or banking colossus Bank of Georgia Group.

I certainly don’t plan to stop buying UK shares for my ISA today. With a little bit of care and a long-term viewpoint, investors can still expect to make great returns from London stock markets. And, following the stock market crash, there are still plenty of stocks out there too cheap to miss.

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Royston Wild owns shares of Diageo. The Motley Fool UK has recommended Diageo and PZ Cussons. 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.

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