Stock Market Rebound: How to Invest £ 7,000 in UK Stocks Now

Currently, the economic outlook is somewhat uncertain. There are still many uncertainties surrounding the coronavirus pandemic process. And Britain still has to be comfortable outside the European Union.

Stock market rebound has begun

However, against that background, many stocks have already recovered from their lows last spring. But if the outlook seems very uncertain, perhaps the last thing most people want to do is buy stock. However, beyond short-term concerns, the situation may improve. And when that happens, the company is likely to prosper again and the stock price can be much higher.

One of the things that drives stock prices is the company’s bottom line. Stocks tend to value their business by looking at their profits or their potential for future profits. As a result, the profits of many companies plummet in the event of an economic shock such as the coronavirus. And their stock price goes down with them. And expectations for better trading in the future are one of the reasons why many stocks are now rising again.

Another factor in stock prices is a multiple of the valuations that the market applies to businesses. In addition, the valuation tends to increase or decrease according to the growth rate of profits. So, for example, a company that achieves an annual revenue growth rate of 2% tends to be a smaller multiple than a company that achieves 20%.

And these twin stock drivers could move the stock market much higher before the economic sunshine re-emerges. This is because the stock market is always looking about six months ahead of reality. And six months from now, the coronavirus pandemic may not look as big a crisis as it is today, for example.

Choose quality at an attractive price

So now it may be a good time to go buy stocks of quality companies. If you wait for the economic situation to look rosy again, it may be too late to get a good stock deal by nailing a sharp valuation. And historically, the plunge in the stock market has always been a recovery and a new bull market. For now, my assumption is that the stock market recovery we’ve already seen could last for years.

of course, Stock market Individual stock prices are notorious for not going straight. They sway up and down in a long-term trend. Just as the underlying business progress is often the case of two forwards and one backward. Therefore, after purchasing a stock or a stock fund, you may incur a short-term loss to your stock trading account. However, I want to invest £ 7,000 right now and aim to continue investing for at least 7 years.

Over the long term, short-term dips are often forgotten.If i Choose my stock carefully And make sure they are backed by a quality, growing business. My return may be worth having over the next few years. And that’s especially true when buying when valuations are attractive. For example, for now, we want to diversify our £ 7,000 investment among stocks such as major pharmaceutical companies. GlaxoSmithKline (LSE: GSK), Soft drink supplier Britvic (LSE: BVIC) And business software companies Sage (LSE: SGE)..

Kevin Godbold does not have a position in any of the shares mentioned. The Motley Fool UK recommends Britvic, GlaxoSmithKline, and SageGroup. The views expressed about the companies mentioned in this article are those of the author and may differ from the official recommendations made by subscription services such as Share Advisor, Hidden Winners, and Pro. Here at The Motley Fool, by considering different insights, Better investors than us.