£5k to invest in UK shares? I’d use these 3 steps to find the best FTSE 100 bargain stocks today

I think now could be the right time to buy FTSE 100 (INDEXFTSE:UKX) shares for the long run while they trade at bargain prices.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Finding the best FTSE 100 bargain shares could be a challenging, but rewarding, task for long-term investors. The index’s outlook may now be relatively volatile and uncertain after its recent market crash. However, this may present cheap UK shares that have the potential to deliver high returns.

As such, now could be the right time to invest £5k, or any other amount, in companies with low valuations, wide economic moats and long-term growth potential. They could boost your portfolio’s performance and improve your financial position.

FTSE 100 bargains

Assessing the value of FTSE 100 shares has become more difficult over recent months. Previously, forecasts may have been used and past profit figures considered when seeking to ascertain whether a stock offered good value for money. However, now that the economic outlook is much more difficult to predict, and some companies have experienced falling profitability, the task is more challenging.

Despite this, it is possible to use factors such as past financial performance, asset values and the valuations of sector peers to gauge whether a business is fairly priced. Investors may then wish to obtain a wide margin of safety to protect themselves against a further stock market crash that could yet occur in the short run.

Economic moats

FTSE 100 companies with an economic moat, or competitive advantage, may be in a stronger position to overcome the difficulties faced across many sectors at the present time. For example, they may have a unique product that enjoys relatively high demand, or a loyal customer base may mean that their sales performance is more consistent than that of their peers.

Companies with economic moats may also be in a stronger position to benefit from a likely economic recovery. Although the prospects for UK shares may be downbeat in the short run due to risks such as a second wave of coronavirus cases, history suggests that they are likely to recover. By purchasing the best quality companies that have competitive advantages, you could reduce your risks and potentially improve your returns.

Growth trends

Identifying growth trends across the FTSE 100’s various sectors may prove to be a challenging task. The outlook for a number of industries has changed materially over recent months.

However, a number of sectors are likely to experience strong long-term growth in demand due to ongoing global trends. For example, an ageing world population may mean that demand for healthcare products and services continues to rise over the coming years. Similarly, emerging markets could produce strong growth in demand for consumer goods over the coming years.

By investing in companies that are likely to experience growing demand for their goods and services, it is possible to unearth the FTSE 100’s best bargains to boost your financial outlook.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Peter Stephens 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.

More on Investing Articles

Investing Articles

Publish Test

Lorem ipsum dolor sit amet, consectetur adipiscing elit. Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua. Ut…

Read more »

Investing Articles

JP P-Press Update Test

Read more »

Investing Articles

JP Test as Author

Test content.

Read more »

Investing Articles

KM Test Post 2

Read more »

Investing Articles

JP Test PP Status

Test content. Test headline

Read more »

Investing Articles

KM Test Post

This is my content.

Read more »

Investing Articles

JP Tag Test

Read more »

Investing Articles

Testing testing one two three

Sample paragraph here, testing, test duplicate

Read more »