Investing £1k a month in UK shares could be a means of retiring with a million. After all, the FTSE 100 and FTSE 250 have recorded annualised total returns of around 8% in recent decades, and could do likewise in the coming years.
A £1k monthly investment, therefore, would produce a £1m portfolio within 28 years at that rate of return. That would be sufficient for a 40-year-old to retire at 68 with a seven-figure portfolio.
Of course, the 2020 stock market crash has left many shares trading at low prices. Therefore, it may be possible to outperform the FTSE 100 and FTSE 250 to obtain a surprisingly large retirement portfolio in a shorter space of time.
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Buying cheap UK shares today
Buying cheap UK shares such as Shell and GSK could lead to relatively high returns on a £1k monthly investment over the long run. Their share prices continue to trade lower year-to-date, which could mean they offer capital growth potential over the coming years.
The GSK plans to split into two businesses may improve its efficiency. Its pipeline also suggests that it has the potential to deliver improving profitability after a mixed period in 2020 that has included disruption caused by coronavirus. Its 5.7% dividend yield suggests that it offers good value for money.
Similarly, I think Shell could offer good value for money compared to other UK shares. Its 4% dividend yield could realistically grow at a brisk pace over the long run, as the company shifts its strategy towards a low-carbon future. Its recent updates have suggested that the company is in a financially sound position relative to its sector peers. This may allow it to capitalise on a likely global economic recovery.
Improving operating conditions for a £1k monthly investment
Investing £1k a month in UK shares such as Tesco and Barratt Developments could also be a sound long-term move. They appear to have the potential to outperform the FTSE 100 as a result of a likely improvement in their operating environments. For example, Barratt could benefit from a period of low interest rates that makes housing more affordable across the UK. Furthermore, its solid financial position and large land bank mean that it may have a competitive advantage over its peers.
Meanwhile, Tesco’s investment in online capacity could pay off in the coming years. It now has a leading position in the online grocery sector that could allow it to produce higher profit growth than sector peers in an era when digital consumption is likely to grow. With a 4% dividend yield forecast for next year, it also appears to offer good value for money and income investing potential at a time when demand for passive income shares could increase. This may help to lift its share price over the long run.
