I’d invest £250 a month in UK shares in an ISA to retire early

After the latest leg of the stock market crash, UK shares are even cheaper than they were. This gives long-term investors an exciting buying opportunity, but some will be wary. Share prices could fall further, over the weeks ahead. Especially if we get a second lockdown. So how do you […]

After the latest leg of the stock market crash, UK shares are even cheaper than they were. This gives long-term investors an exciting buying opportunity, but some will be wary. Share prices could fall further, over the weeks ahead. Especially if we get a second lockdown.

So how do you respond? History shows that stock markets always recover, if you give them time. So I’m planning to take advantage of today’s attractive prices, by investing the odd lump sum when I have money to spare. At the same time, I am also investing a regular monthly amount, which will buy UK shares regardless of what happens to stock markets in the weeks ahead.

A simple way of doing this is to set up a Stocks and Shares ISA. All your returns are free of tax, and they are cheap and easy to manage. If you pay in a regular monthly sum year after year, you could build a generous nest egg over time. It could even help you retire early, if that’s what you want to do. It’s always nice to have the choice.

The FTSE 100 looks cheap after the stock market crash

UK shares have had a tough year, thanks to Covid-19. In fact, they have underperformed global stock markets since the EU referendum. The FTSE 100 is heavily exposed to both the big banks and big oil companies, both of which have been hit hard by the pandemic.

This means UK shares are look relatively cheap. Investing is cyclical, which means this opportunity may not last long. If we sort out Brexit and get a coronavirus vaccine, the UK economy may soon find itself in a stronger position than it is now.

Of course, that could take time. You may not want to chance a lump sum today. Or maybe you do not have the capital to spare. That’s why I like to invest monthly. After setting up a regular monthly payment, you scarcely notice the money leaving your account. Instead, you budget around it. The money rolls up without you noticing, especially if you reinvest your dividends for growth.

I’m building my retirement on UK shares

Let’s say you have 30 years until retirement. If you invested £250 a month in UK shares, and they returned an average 7% a year, with dividends reinvested, you would have £303,219. If you withdrew 4% as income after you stopped (known as the safe withdrawal rate because your pot should never run dry), you could generate £12,000 a year.

The new state pension is worth £9,110 a year, assuming you get the full amount. Combined, this could give you income of more than £20,000 a year in retirement. That’s on top of any workplace pension you may have.

If you want more than that, you will have to pay in more than £250 a month, either that or invest for longer. The sooner you start, the better. Especially since UK shares are so cheap right now.

You could start with this opportunity.

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

Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 I’d invest £250 a month in UK shares in an ISA to retire early appeared first on The Motley Fool UK.

ASNF

Next Post

Pepsi and Detroit Lions wishes its fan Happy Golladays

Sun Nov 1 , 2020
Pepsi is launching “Happy Golladays’ – a campaign that proves nothing is more celebratory than football, over-the-top holiday threads and epic eats Detroit is home to some of the most unapologetically loyal fans the NFL has to offer and with the most festive time of year right around the corner, […]