With cautious predictions of an economic recovery, is now a good time to buy UK shares for my portfolio? If so, how do I go about it? Lets take a look.
Is now a good time to buy stocks?
There are some businesses that have a positive outlook and are tempting from an investment perspective. Others do not possess the same outlook and are ones I would avoid.
There are external factors I consider when purchasing stocks. These include the current state of the economy, the pandemic, political factors, and looking ahead.
For example, I feel buoyed by the fact that successful vaccination across the country could result in increased movement, trade, and spending. In addition to this, previously closed industries such as travel and entertainment are beginning to reopen. Furthermore, new industries have thrived since the pandemic began. These include e-commerce and technology.
The risk of investing in UK shares currently is that there is the threat of new strains of the coronavirus. Next, FTSE indices have already seen a rise since market-crash lows so I must consider if they are due a fall. Finally, I think the effects of Brexit will affect the economy and investment viability.
How I invest in UK shares
Firstly, context is important. For example, just because something is not cheap doesn’t make it unattractive. We are in for another period of near zero interest rates, low growth and low, or no, inflation. In this environment, businesses in growing markets will do well. So, something that is considered expensive now may look cheap in a few years time.
Research and due diligence are everything. I learnt this from Warren Buffett. I don’t have a complex formula or theory when I invest for my portfolio.
Finally, I believe investing is for the long term. I understand shares can fall and rise and I need to ensure I understand the ups and downs of investing before I part with my hard-earned cash.
Two picks I have considered recently
One UK share I like is Avast (LSE:AVST). The burgeoning cyber security firm has grown massively in recent times. It is being courted by an American rival for a takeover and therefore its share price surged. The risk with Avast is that all the takeover news is speculation so far. Furthermore, Avast is a small fish in a big pond, which means it needs to work harder against bigger firms and will always be susceptible to being swallowed by a larger outfit.
Next, money transfer services provider Wise (LSE:WISE) listed in the FTSE a few weeks ago to much fanfare. It was the largest ever public listing of a UK tech business, with a hefty valuation of £8.75bn at 880p per share. The Wise share price has increased over 9% since that listing. Wise’s ability to offer quick cheap transfer solutions have helped it amass millions of customers. The risk with Wise, however, is its reliance on payment partners such as Visa, to facilitate its offering. If such a partnership were to cease or stall, Wise could see its share price tumble.
Jabran Khan has no position in any shares mentioned. The Motley Fool UK has recommended Avast Plc. 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.