The average person in the UK has £6,757 in savings. Rather than keeping all of that in a savings account, I’d look to invest it in UK stocks.
Buying stocks with my money, rather than leaving it in a savings account, allows me to become a business owner. In doing so, I can build my wealth as the businesses I invest in make money.
I wouldn’t invest all of that, to protect myself from any emergencies in the near future. But I’d look to invest some of it, and I’d try to diversify my investments across various different sectors.
Utilities
To start with, I’d look to buy shares in companies that have highly predictable earnings. Utilities stocks are a good example of this.
In general, utilities companies offer good protection against inflation. Their earnings are regulated and this brings risk of unfavourable regulation in the future, but this does mean that they are able to pass on increases in costs to their customers.
The most obvious UK stock to buy from the utilities sector is National Grid. At current prices, the stock has a dividend yield above 5%, meaning that it could start generating cash for me right away.
I’ve been ignoring National Grid shares for some time. But at today’s prices, I think they could be a great addition to my portfolio when I’m in a position with excess cash to invest.
Materials
I’d also look to invest in some companies that are involved in getting basic materials out of the ground. One that stands out to me in this area is Endeavour Mining.
The company owns and operates gold mines across Africa. This brings risk from political instability, but it also means that Endeavour is able to extract gold at lower prices than its competitors.
In a business where the product is a commodity, the cost of extraction is key. Since there’s no obvious difference between one company’s gold and another’s, the competition comes down to cost.
In my view, Endeavour Mining could be a great addition to my portfolio. I’m looking to buy shares in the near future.
Consumer products
Right now, the UK seems to be heading towards a recession. Combined with inflation, this makes a difficult macroeconomic environment.
There are some companies, though, that I think will do better than many expect. One of these is Howden Joinery Group.
Higher prices for everyday goods is likely to put pressure on household budgets. As a result, I expect to see fewer people moving house over the next year or so.
Instead, I’m anticipating an increase in the number of people attempting to improve their existing houses. And that’s where Howden’s comes in.
Howden Joinery Group supplies kitchen products, appliances, and materials to trade customers. I’m anticipating an increase in demand over the next couple of years and I think that the company will benefit from this.
In my view, the broader market is missing this point. That’s why I’d buy the stock at today’s prices if I had the cash to invest.
UK stocks
I think that the stocks I’ve identified here could be a great way to protect a portion of my savings from the effects of inflation. A lot of UK stocks in various different sectors look attractive to me at today’s prices.