If I had no savings at 40, I’d make up for lost time by investing in the best UK stocks I could find. I think top British shares on the FTSE 100 and FTSE 250 are a great way to build my long-term wealth, and secure a decent income in retirement.
My first step would be to build up a cash rainy-day fund, equivalent to around three to six months of salary, for emergencies. That way if my car breaks down or the boiler bursts, I won’t have to raid my long-term savings. I’d invest in a spread of the best UK stocks, with the aim of holding onto them for the long term.
I’d start by buying an index-tracking fund that follows the fortunes of the FTSE All-Share. This covers around 600 of more than 2,000 companies traded on the London Stock Exchange, giving me instant exposure to some of the best UK stocks around (and some not so good ones).
I’d build my wealth on the best UK stocks
Then I’d spend my time researching individual stocks. Buying direct equities is riskier than buying a fund, but it does offer scope for outperformance.
I’d start by hunting down the best UK stocks to buy on the FTSE 100. There are some temptings opportunities out there right now, from household names such as Legal & General Group and Unilever, to lesser-known operators Bunzl and Intertek Group. I’d zone in on companies with growing revenues, loyal customers, healthy balance sheets, minimal debt, and a great history of increasing dividend payouts.
I’d also look for top UK stocks with a defensive ‘moat’, which makes it hard for new competitors to gain a foothold. That’s never easy. Tesco once looked impregnable but German disruptors Aldi and Lidl have nibbled away at its market share.
I’d put FTSE 10o stocks in an ISA
Ideally, I’d build a portfolio of at least 10 of the best UK stocks, maybe increasing that to 15 over time. This will reduce the damage if one or two underperform. I’d invest inside my £20,000 Stocks and Shares ISA allowance for tax-free returns.
There are no guarantees when investing, as we saw in March last year. Individual companies can under-perform at any time. And a stock market crash can be brutal. The value of my portfolio could fall by a third in a short period. That’s inevitable at some point, but I’d treat a stock market crash as an opportunity, rather than a threat. I’d take the chance to pick up more of the best UK stocks, at reduced prices.
Starting at 40, I’d have more than 25 years before retirement. That gives me time to build enough wealth to retire on, provided I don’t waste any more time. I reckon a portfolio of the best British stocks, plus a spread of funds giving access to fast-growing foreign markets, should give me the comfortable retirement I crave.
I'd take a look at these opportunities.
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Bunzl, Intertek, Tesco, and Unilever. 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.