If I had to pick five UK shares to invest £5,000 in today for the first time, I’d choose carefully. I’d pick companies that have benefited from the pandemic and could benefit from the economy’s reopening. They’d be part of a more extensive portfolio, of course. Indeed, a portfolio of just five stocks and shares would be incredibly risky. A diversified portfolio of at least 30 stocks may be the better option for investors who are comfortable taking the risk of investing in individual stocks and shares.
With that in mind, here are five UK shares I’d buy with that investment of £5,000 now as part of a broader investment strategy.
UK shares to buy
As noted above, the companies I’m looking at fall into two different buckets. Businesses that have prospered in the pandemic, and those that may see an improvement in fortunes as the economy opens up.
Companies that fall into the latter bucket include airlines IAG and easyJet. Typically, I stay away from airline groups. The industry is incredibly challenging to understand, and there are so many risks these businesses face it’s hard to predict what the future holds for them. Risks such as fuel prices, fare wars and labour disputes have all been headwinds to growth in the past.
Nevertheless, not many businesses are as well placed to capitalise on the recovery as these two airlines. Both have strong brands and have been able to navigate the pandemic so far. This should help them return to growth when international travel is once again allowed. Reports already suggest that holiday bookings have risen substantially in the past few days. I think this could be an indicator of what’s to come for these UK shares.
Slow and steady
As well as the two airlines outlined above, I would also buy pharmaceutical groups GlaxoSmithKline and AstraZeneca. Despite the challenges these companies face, such as high levels of competition, I’m optimistic about the long-term outlook for these businesses.
Healthcare is a growing industry. That’s unlikely to change. As the world’s population continues to grow, it’s highly likely more money will be spent on healthcare year after year. This growth should benefit companies like Glaxo and Astra.
Granted, these corporations aren’t going to report the fastest earnings growth around, but as healthcare spending increases, their sales should as well, although this is by no means guaranteed. And I have to be aware that drug development is expensive and success isn’t guaranteed so that’s always a risk.
Finally, I would add Legal and General to my basket of UK shares. This pension and asset manager is one of the UK’s largest financial firms. It’s also one of the country’s best dividend stocks. At the time of writing, the shares support a dividend yield of around 6.6%. Unfortunately, this level of income isn’t guaranteed. The company could cut its dividend for many different reasons. Higher costs and increased regulatory scrutiny are just two reasons.
Nevertheless, I’m happy to accept these risks in exchange for investing in what I believe to be one of the best ways to play the UK economic recovery.