Investing for retirement can be a challenge. The increasing cost of living means it’s a stretch for many people to start building a nest egg for when we retire. There’s a cheat which means I might not have to spend a fortune to enjoy a comfortable retirement though. It’s investing in UK shares after stock market crashes.
Buying after stock market crashes
Stock investing is a great way to try and build a handsome retirement fund. The average long-term investor tends to enjoy an average yearly return of 8-10%. This means someone who plans to retire at 65 can expect to have built a portfolio worth up to £1.36m (with dividends reinvested) if they start investing £400 a month at the age of 30.
But what if I don’t have that £400 to invest each month in something like a Stocks and Shares ISA? Well, this is how buying after stock market crashes can save my bacon. Investor returns can sail above that 8%-10% average in the bull market which always follows heady corrections.
This is how hundreds of Stocks and Shares ISA investors became millionaires during the 2010s. They bought UK shares at low cost after the 2007-2008 financial crisis and watched them balloon in the subsequent bull market. This was a period during which the FTSE 100 doubled in value and the FTSE 250 trebled.
3 UK shares on my ISA watchlist
Now I’m not going to say that I’m going to be a millionaire. That’s especially true if an investor can only afford to invest a small amount in UK stocks each month. But the sort of returns people enjoyed during the 2010s can make a big difference to my income post-retirement even with only have modest sums to invest.
Here are three UK shares I think could soar in value following the 2020 stock market crash:
- Advertising giant WPP has fallen around 25% in value during the past 12 months. This enables an investor to nip in and grab a top-quality FTSE 100 stock for next to nothing. Marketing budgets are usually one of the fastest things to recover during economic recoveries. And WPP has the scale and reputation to ride this bounceback to the fullest.
- I’m expecting Trifast to recover strongly from its 20% price drop over the past year too. This UK share manufactures a broad variety of bolts, screws and other fastenings for an array of cyclical sectors. But it’s the prospect of rocketing car sales when Covid-19 abates that could drive profits here to the stars.
- Fresh coronavirus lockdowns have tarnished the prospect of a sharp profits recovery for UK travel and leisure shares in 2021. This wouldn’t put me off buying Wizz Air shares however. I’m tipping the Hungary-based flyer to balloon in value this decade as low-cost airline ticket demand rockets in fast-growing European emerging markets. Its ongoing commitment to expansion despite the Covid-19 crisis bodes well for future profits growth too.
Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Wizz Air Holdings. 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.