How I’d invest £10,000 in UK shares for passive income

Don’t we all want to make our money stretch that bit further? Here, John Town details how he would use £10,000 to try to generate passive income with these UK shares.

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Making my money stretch that bit further by investing in UK shares with high growth potential can be a great way for me to generate passive income for the years to come. 

In this article, I look at the industries I believe are worth investing in, and the shares I think could grow considerably in the next five to 10 years. Let’s say I have £10,000 to allocate, here’s how I’d do it. 

Choosing the industries

First, I’d pick the sectors that I think are going to be in high demand. This way, I can take a look at the growth potential of the market as a whole, instead of just an individual share. Further, if a share I choose is a low performer, then at least the wider segment’s success could potentially drive share price growth. 

Here are the industries that I believe show potential for growth: 

  • Cybersecurity:  Demand for this sector is clearly high as revenue for UK cybersecurity companies is rising every year. One thing to bear in mind though is that cyber attacks are constantly changing so individual companies may find it hard to keep a competitive advantage. 
  • E-commerce: Offline retail growth is almost non-existent as the e-commerce market continues to develop. That said, we could see some pullback in this sector as pandemic restrictions are lifted. 
  • Renewable Energy: The pandemic and some extreme weather have made many world leaders realise the damage we’re doing to the earth. I expect demand in this sector to skyrocket, driven by consumer demand and legislation. That said, profitable growth in this area could be slow and due to reinvesting, dividend returns might be marginal. 

Choosing my UK shares

Now let’s look at the shares that I’m selecting. In the cybersecurity sector, I’m looking at BAE Systems and Avast. Both of these share prices have risen since the start of 2021 and the firms are performing well financially. BAE Systems could run into some ESG issues in the future however, and the Avast share price might see some volatility if Norton‘s bid falls through. 

For my online retail UK shares, I would add Boohoo and Ocado to my portfolio. Ocado is developing rapidly, but due to its investment in growth, it’s losing money at the moment. Boohoo, on the other hand, is reporting good revenue and profits growth. But both of these companies will have to face strong competition from the likes of Amazon and Zalando

The ESG companies I would pick are The Renewables Infrastructure Group and ITM Power. Renewables Infrastructure has a well established basis with investments in solar, wind and battery storage, however the share price isn’t exactly cheap with a 10% premium to Net Asset Value (NAV). ITM is generating a lot of revenue, but the company is relying on unsigned deals that could fall through. 

These are the UK shares and industries that I believe have great potential to grow in the next decade. Generally speaking, they’re all in some way reliant on the new technological era we find ourselves in. I believe that right now the global economy is only seeing the baby steps of what’s to come. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

John Town owns shares of BAE Systems, ITM Power, Ocado and The Renewables Infrastructure Group. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended Amazon. The Motley Fool UK has recommended Avast Plc, Ocado Group, and boohoo group and has recommended the following options: long January 2022 $1,920 calls on Amazon and short January 2022 $1,940 calls on Amazon. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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