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Long-term stock market investing in a shaky economic backdrop

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I like to take a long-term approach to investing in stocks. That’s because it takes some of the stress out of worrying about short-term fluctuations. Wealth management firm UBS recently released a 2021 Year Ahead outlook report. In it were three potential causes of market setbacks for 2021.

  1. The economic outlook for the country remains uncertain and on shaky ground
  2. The pandemic is not yet under control
  3. Geopolitical tensions are again raising their ugly head

This all makes for a fraught scenario. However, the vaccine rollout is picking up pace and Brexit is done. So, I think there’s still good reason to hope for a brighter future.

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Long-term investing

When it comes to investing in the UK stock market, here’s what I’d do. And here’s why I think the UK market offers value hidden in its depths. We’re living in a time that’s both scary and exciting for investors. Low interest rates make the stock market very appealing right now. But that may not last if inflation resurfaces with a vengeance and interest rates have to be hiked. There are already signs inflation has begun, but the government so far has no plans to raise interest rates soon.

With so many unknowns in the short term, I prefer to take a long-term approach to stock market investing. Billionaire investor Warren Buffett is a big advocate of this style of investing, because in choosing solid companies that go the distance, it stands to reason that their share prices will gradually rise too.

I like a long-term investment approach, because it means I can look at the bigger picture and worry less about the highs and lows of a volatile market.

UK stocks to buy and hold

In comparison to the US stock market, UK shares have performed quite poorly during the pandemic. However, the UK is rolling out vaccines at an impressive pace and it ignites hopes that society can return to a level of normality in the next few months (which the UK government’s new ‘roadmap’ out of lockdown for England seems to suggest). I think that will provide a welcome boost to the UK stock market and its many unloved shares.

Tech stocks are likely to remain in vogue as many aspects of society advance technologically. 5G, finance, health and renewables are all making strides in tech and I expect that will continue. Thinking long term, I’d consider investing in Vodafone and Spirent Communications for 5G. I also like cyclical stocks such as alcoholic drinks specialist Diageo and medical technology company Smith & Nephew. The latter has suffered badly from the lull in operations, but I believe that should be temporary.

I also like mining companies exploring for commodities that are in high demand such as copper. And I’m a fan of oil stocks because I believe the oil price is set to rise once governments globally lift travel restrictions. 

Having a logical strategy, backed up by reasoned research, gives me confidence in my portfolio. I like to take my time researching the stocks I’m interested in buying. I can then buy with the reassurance that I believe this company will last and thrive in the coming years. I think having confidence in my stock purchases is the secret to creating a reliable income from the stock market.

For regular stock market investing ideas and help choosing the best shares to buy now, sign up to The Motley Fool today.

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Kirsteen has no position in any of the shares mentioned. The Motley Fool UK has recommended Diageo. 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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