Stock market crash: I’d drip-feed £321 a month into cheap UK shares in an ISA to retire in comfort

Royston Wild
·3-min read
Image of person checking their shares portfolio on mobile phone and computer
Image of person checking their shares portfolio on mobile phone and computer

Has the 2020 stock market crash created the investment opportunity of a lifetime? It’s clear the reasons behind the colossal correction mean UK share investors need to be extra careful. The number of corporate casualties could balloon during the current economic downturn. But those who do their research before buying stand a chance of making a fortune in the years ahead.

Studies show that the average yearly return for long-term share investors sits at between 8% and 10%. Those that buy in the aftermath of stock market crashes have a chance to beat that range though. They can buy solid UK shares for a much cheaper price than they were at the start of 2020. And then watch them rebound in value as the global economy improves and market confidence recovers.

Retiring comfortably with UK shares

Thousands of UK share investors got stinking rich by following this strategy after the 2008 banking crisis. A large number of Stocks and Shares ISA investors actually made millions in the years following the stock market crash of a decade ago.

Even under the worst case scenario it’s possible for the average UK share buyer to make a healthy pot of cash. And they don’t even have to fork out a fortune in an effort to get rich, or possibly even retire early. Based on that lower annual return figure of 8%, someone who drip feeds £321 a month in UK shares for 35 years can expect to have built a healthy nest egg north of £687,000.

When topped up with the annual State Pension (which currently sits at £9,110 for those entitled to the full benefit), this means investors can reckon on a very comfortable retirement.

6% dividend yields

As I say, the macroeconomic outlook is less than reassuring as Covid-19 infections spread and lockdown measures tighten. However, there are plenty of top-class UK shares with solid balance sheets that should sail through the crisis and deliver mighty long-term returns. And following the 2020 stock market crash many are far too cheap to miss.

Even those with a low tolerance of risk can be confident in buying UK shares today. They can invest in Good Energy Group, for example, a firm whose operations remain largely unaffected by economic slowdowns. The renewable energy generator trades on a rock-bottom forward price-to-earnings (PEG) ratio of 0.9. And it has the capacity to soar in value in the years ahead as demand for low-carbon energy takes off.

Rising arms budgets mean that Babcock International Group is another great value stock in the current climate. This UK share trades on a forward price-to-earnings (P/E) ratio of just 6 times. Food producers are also robust selections in troubled economic times like these. And sausage skin maker Devro is a particularly-attractive buy. It trades on a P/E multiple of 10 times for 2020 and carries a gigantic 6.2% dividend yield.

The post Stock market crash: I’d drip-feed £321 a month into cheap UK shares in an ISA to retire in comfort appeared first on The Motley Fool UK.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Devro. 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.

Motley Fool UK 2020