You are using an older browser version. Please use a supported version for the best MSN experience.

Have £5k to invest in an ISA? I’d buy UK shares despite the threat of stock market crash 2

The Motley Fool logo The Motley Fool 10/11/2020 Peter Stephens
a man using a laptop computer sitting on top of a table: Lady researching stocks © Provided by The Motley Fool Lady researching stocks

Some investors may avoid buying UK shares right now due to the potential for a second stock market crash. While this may mean they avoid an uncertain period for the FTSE 100 and FTSE 250, the prospects for other assets such as cash, bonds and buy-to-let property may be somewhat challenging over the long run.

Therefore, investing £5k, or any other amount, in British shares in an ISA could be a relatively sound move. It may improve your financial outlook to a greater extent versus investing money in other assets.

An uncertain near-term outlook for UK shares

The performance of UK shares could be disrupted by a second stock market crash over the coming months. Risks such as the US election, Brexit and coronavirus could cause investor sentiment to weaken dramatically over a short period of time.

However, there is no guarantee that a decline in share prices will occur in the short run. Certainly, the current recovery for the FTSE 100 and FTSE 250 will not remain in perpetuity. However, the past performance of British shares shows that they can be difficult to forecast in advance. Therefore, investors selling stocks may end up avoiding a market decline that does not materialise.

Worse still, selling UK shares leaves many investors with a lack of attractive options. The recent stock market crash has caused policymakers to reduce interest rates. Therefore, the returns available on cash and bonds are at extremely low levels. Meanwhile, rising house prices mean that there could be a lack of value available for buy-to-let investors. This may lead to disappointing returns over the coming years.

Investing money in an ISA

As such, UK shares may offer a relatively attractive investment opportunity at the present time. The threat of a second stock market crash means that there are numerous high-quality companies currently trading at low prices as a result of weak investor sentiment towards their sector, or the wider index. Over time, they could deliver impressive returns that improve your financial situation.

Moreover, the past performance of the stock market shows that it can deliver relatively high returns over the long run. For example, the FTSE 100 has recorded an 8% annual total return since inception. Over that time, it has experienced numerous bear markets and downturns. This suggests that even if there is a fall in British share prices over the coming months due to the aforementioned risks, long-term investors can experience strong growth due to their extended time horizon.

Therefore, now could be the right time to continue to invest in a range of UK shares. They could outperform other mainstream assets in the long run, albeit with the prospect of high volatility due to the threat of a second market crash.

A Top Share with Enormous Growth Potential

Savvy investors like you won’t want to miss out on this timely opportunity…

Here’s your chance to discover exactly what has got our Motley Fool UK analyst all fired up about this ‘pure-play’ online business (yes, despite the pandemic!).

Not only does this company enjoy a dominant market-leading position…

But its capital-light, highly scalable business model has previously helped it deliver consistently high sales, astounding near-70% margins, and rising shareholder returns … in fact, in 2019 it returned a whopping £150m+ to shareholders in dividends and buybacks!

And here’s the really exciting part…

While COVID-19 may have thrown the company a curveball, management have acted swiftly to ensure this business is as well placed as it can be to ride out the current period of uncertainty… in fact, our analyst believes it should come roaring back to life, just as soon as normal economic activity resumes.

That’s why we think now could be the perfect time for you to start building your own stake in this exceptional business – especially given the shares look to be trading on a fairly undemanding valuation for the year to March 2021.

Click here to claim your copy of this special report now — and we’ll tell you the name of this Top Growth Share… free of charge!

More reading

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.

The post Have £5k to invest in an ISA? I’d buy UK shares despite the threat of stock market crash 2 appeared first on The Motley Fool UK.


More from The Motley Fool

The Motley Fool
The Motley Fool
image beaconimage beaconimage beacon