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No savings at 50? I’d invest in top UK shares

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If I had no savings at 50, I’d scour the stock market for top UK shares to help me build up a pension pot for my retirement. I’m happy to accept the added risk of investing in individual stocks, and with retirement still 15-20 years away, I can look past the inevitable short-term volatility.

The attraction of choosing a range of top UK shares from the FTSE 100 and FTSE 250 is that they offer both share price growth and dividend income. I’d reinvest all my dividends while I’m still working, then draw them as income after I retire.

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I’d start with FTSE 100 stocks

I’d keep a pot of rainy-day cash on instant access for emergencies, but I wouldn’t hold long-term savings in cash. Today’s deadly combination of rock-bottom interest rates and rising inflation will destroy its value in real terms.

My first step would be to invest in an index-tracking fund that follows the fortunes of the FTSE All-Share. That would instantly give me a broad spread of stocks. Then I’d start scouring the market to find some best-buy UK shares that I reckon could outperform.

I can see plenty of opportunities, as Covid restrictions ease and the economy reopens. The recovery will be bumpy. And so will stock market performance. That doesn’t worry me too much. Even best-buy UK shares will experience their ups and downs, but over 15 or 20 years, I’d hope they would deliver a superior return to cash.

I’d start by hunting down the best UK stocks to buy on the FTSE 100. I’d start by examining household names such Aviva, Barclays, Barratt Developments, Tesco and Unilever.

I’d also dig up other top UK shares such as BAE SystemsBunzl, GlaxoSmithKlineIntertek Group and M&G. Before buying any of them, I’d check carefully to make sure they aren’t overvalued, and how much dividend income they offer. I’d also check debt levels are under control, revenues are recovering after the traumas of the last year, and management is committed to rewarding shareholders through dividends and buybacks.

I’d buy a spread of top UK shares

I’d also look for top UK shares with a defensive ‘moat’, which makes it hard for new competitors to gain a foothold.

Starting at 50, time is of the essence. I’d start feeding lump sums into the market right away, and possibly set up a regular monthly payment too. I’d first target two or three stocks, then aim to expand my portfolio to between 10 and 15, to spread risk, as I always have to accept that returns aren’t guaranteed with share investing.

If the stock market did crash, I wouldn’t panic. Instead, I take the opportunity to buy more of my favourite stocks at the lower price. I’m betting that 15 years is long enough for my portfolio to start bearing fruit. Then I’ll stay invested into retirement, for continued income and growth.

Top UK shares would be my priority, but I’d also add some overseas investment funds for further diversification.

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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays, Bunzl, GlaxoSmithKline, 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.

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