Making a million with UK shares may be a more realistic goal than many investors realise. After all, the FTSE 100 and FTSE 250 have delivered annual total returns of around 8% per year in recent decades. As such, a £100k investment, or a £750 monthly investment, would become worth over a million within 30 years at a similar rate of return.
However, with the stock market yet to fully recover from its 2020 crash, there are many cheap stocks available to buy. They could produce strong growth in 2021 and in the coming years that increases an investor’s prospects of making a million.
Undervalued UK shares after the stock market crash
Undervalued UK shares that could deliver impressive capital returns include retailers such as Tesco and Next. They have solid online positions that may benefit from a likely shift in consumer demand towards digital channels. Both companies also appear to have strong financial positions, as well as sound strategies that prioritise efficiency and investment to improve their competitive advantages.
Similarly, healthcare stocks such as GSK, Smith & Nephew and AstraZeneca appear to be in good positions to capitalise on long-term demographic changes. An ageing world population means that demand for drugs and operations could rise at a solid pace in the coming years. This may provide greater scope for industry operators to deliver rising sales that allow them to command higher valuations relative to other UK shares.
Dividend opportunities within the FTSE 100 and FTSE 250
Other UK shares that could provide impressive total returns that increase an investor’s prospects of making a million include high-yielding dividend opportunities. Not only could they provide a worthwhile passive income in the near term, as well as dividend growth, they could become increasingly popular among investors at a time when low interest rates are pushing demand away from bonds and cash towards income stocks.
As such, the relatively high yields of BAE and Taylor Wimpey could prove to be very attractive. They have forward yields that are in excess of 4.5%. They also appear to be affordable, given their strong balance sheets and enviable market positions. Therefore, their dividend payouts could grow at a relatively fast pace over the coming years as a likely economic recovery catalyses their financial performances.
Meanwhile, UK shares such as Unilever, Diageo and Reckitt Benckiser could provide strong dividend growth opportunities. Their exposure to emerging markets and dominant positions within a wide range of consumer goods markets may mean that they can afford to pay fast-rising dividends over the coming years. This could further increase their appeal among a broader range of investors, and may provide higher total returns. In time, they could have a positive impact on an investor’s portfolio performance that increases their chances of making a million.