Here’s how I’d invest £20k in the best shares now to achieve financial freedom

Investing £20k in the best shares now could lead to impressive returns in the long run. It may provide an investor with greater financial freedom.

Peter Stephens ❯

Having held various senior management positions in the manufacturing sector, Peter founded his own manufacturing company in 1996. This was subsequently sold in 2007. Meanwhile, his passion for investing (which began during the privatisations of the 1980s) remains strong and he couples this with writing for The Motley Fool as a Contractor. His investment style is value-oriented; focusing on company fundamentals, as well as assessing the strength and presence of a competitive advantage. While above-average growth prospects remain very attractive, a greater focus on dividends has crept in since Peter became a part-time retiree in 2007.

Published 16 December, 2020 7:01 am GMT

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Despite the recent stock market rally, a number of the UK’s best shares continue to trade at attractive price levels.

Through buying a diverse selection of them with £20k, or any other amount, an investor can generate high returns in the long run as the stock market recovers.

This may lead to a surprisingly large retirement next egg that provides greater financial freedom in older age via a growing passive income.

Should you invest £1,000 in Relx right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Relx made the list?

See the 6 stocks

Buying the best shares now

Investing money in the best shares now could be a means of reducing risk and improving long-term returns. The most attractive stocks at the present time are likely to be those companies that fulfil two main goals.

First, they have the financial capacity to withstand a period of weak economic performance that may spill over into 2021. As such, companies with low debt, strong balance sheets and competitive advantages may be more appealing.

Second, they’ve the right strategies to capitalise on industry growth trends as the economy recovers. Should they have inflexible business models or outdated strategies, they may face challenging futures.

Clearly, identifying which companies are likely to be the best shares to buy now is very subjective. However, through assessing their quality, it’s possible to find the most appealing companies within a sector. Those that can go on to produce higher long-term returns.

Buying UK shares at cheap prices

Even after the recent stock market rally, many of the best shares in the FTSE 100 and FTSE 250 trade at low prices. Investor sentiment continues to be relatively cautious towards UK shares. This may allow an investor to pick up high-quality businesses when they offer wide margins of safety.

Such a strategy has been very profitable in the past. After all, it uses the market cycle to an investor’s advantage. Since the FTSE 100 and FTSE 250 have always fully recovered from their low points to reach new record highs, there may be added value in buying cheap stocks at the present time.

Of course, this doesn’t mean sacrificing quality to buy cheap stocks. Identifying the best shares to buy now, and buying them at low prices, is likely to mean less risk and higher returns in the coming years.

Investing £20k to obtain financial freedom

Investing £20k in the best shares today could produce a surprisingly large portfolio in the long run. Even if an investor matches the FTSE 100’s historic total returns of 8% per annum, their £20k investment could be worth over £200k within 30 years.

However, through buying the most appealing UK shares at low prices, it’s possible to outperform the stock market. This may lead to a larger portfolio and greater financial freedom as a stock market recovery takes hold in the coming years.