Buying cheap UK stocks today and holding them for the long term can be a useful strategy.The· Past performance Changes in stock markets and the economy suggest that recovery from current challenges is likely to occur in the coming years.
Cheap UK stocks have the potential for long-term growth
Buying assets at low prices rather than high prices can mean more room for capital growth. Inexpensive UK equities may benefit more than their peers from a recovery in the equity market that raises investors’ expectations for future performance.
Such strategies have been successful in the past.For example, investors who bought different ranges FTSE 100 Equities after the 2009 global financial crisis may have benefited from doubling the price of the index in the years that follow.
Similarly, after the 1987 crash and the collapse of the dot-com bubble, buying stocks that were often traded at low prices could have provided room for capital growth above the long-term average of the stock market.
Long-term investment period
Of course, it can take years for today’s cheap UK stocks to generate high returns. At this point, the economic outlook is very uncertain. Therefore, this can mean that many industries are facing harsh operating conditions over a long period of time.
So it may be wise to look at the UK stocks purchased at this time in the long run. In the coming months, they may experience additional challenges as the cost of a coronavirus pandemic becomes apparent. This can lead to paper losses or negative returns for investors who take a long time to recover.
History suggests that long-term investors have been able to overcome short-term volatility to profit from the high single-digit annual total returns of the equity market.
Investing in a tax-effective way through ISA
Currently, some UK stocks are trading at cheap prices, so buying them in a tax-effective account such as ISA can be a healthy move. Investment made through ISA is exempt from taxes, including capital gains tax and dividend tax.
This could lead to an increase in investor net income if the equity market continues its long-term trend of generating relatively attractive capital growth and dividends.
Today, by building a diverse ISA portfolio of cheap resources, you may be able to obtain surprisingly large nest eggs in the long run. While risky and volatile can occur, the equity market can grow in the coming years and raise the price of today’s undervalued equities.
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.
Why buy cheap UK stocks at ISA today and hold them until 2030
https://www.fool.co.uk/investing/2021/02/02/why-id-buy-cheap-uk-shares-in-an-isa-today-and-hold-them-to-2030/ Why buy cheap UK stocks at ISA today and hold them until 2030