I reckon investing in a spread of top UK shares is a great way to build wealth for my retirement, but I’m wary of paying big lump sums into the market. My concern is that shares will crash the next day, and I will be instantly down on my investment.
There is a very simple way around this. I have set up a direct debit, to invest a regular monthly sum into a spread of top UK shares. This means that even if markets crash next day, I will only be down a small amount. I will then have another shot at buying more top shares the following month.
This way, I do not have to pay attention to whether the stock market is rising, falling or whatever. I will invest my regular monthly chunk regardless. In fact, I actually benefit when share prices drop, because my monthly payment picks up more stock.
I’m buying top UK shares
This means I never have to worry about timing the market, which is a fool’s game anyway. Nobody can do it consistently, no matter how clever they think they are.
There is another advantage to investing regular sums in the market. Once I have set up a direct debit, I can forget about it, more or less. That money automatically comes out of my account, so I don’t even notice it. That makes investing easier and less painful. I’ll invest using my Stocks and Shares ISA allowance, so I don’t have to pay income tax and capital gains tax on my returns.
I’m still 15 years away from retirement. If I invest £250 a month, and my portfolio of top UK shares grows at 6.5% a year after charges, that money will grow to £77,262 by the time I stop working. I don’t think that’s enough to retire on comfortably, even with my state pension entitlement. Fortunately, I have other retirement funds in a spread of pensions and tax-free ISAs.
I’m investing lump sums too
That said, I am beginning to get worried. They say retirement creeps up on you, and in my early 50s I am discovering the truth of this. Suddenly, it doesn’t seem that far off, so I will be doing something else on top of my £250.
Whenever I have a lump sum to hand, I plan to buy more top UK shares. I’m happy to invest lump sums of up to £1,000, as it shouldn’t hurt too much if markets crash next day. I will simply hold on for the long term, then the recovery should come.
Like many people, I have been spending way less than usual during the pandemic. While I’ll enjoy a few trips to the pub and a holiday one day – when allowed – I am directing most of my savings into the stock market. I’m on the hunt for top opportunities today. As I explain here, I think banks, mining companies, household goods companies and pharmaceutical shares are among the top UK stocks to buy right now.