Saving for retirement is a sensible financial decision, yet I believe it can pale in comparison to investing in UK shares. Despite higher interest rates, savings accounts still don’t come close to delivering the long-term average return of the stock market. And with plenty of cheap stocks to capitalise on today, the opportunities to earn market-beating returns are plentiful.
As interest rate cuts slowly emerge, 2025 could deliver a mini economic boom. After all, a lot of households and businesses are delaying projects and large expenses into next year. In other words, investors may be looking at a terrific jumping point to kick-start a retirement portfolio capable of delivering long-term passive income.
Capitalising on cheap UK shares
We’ve already seen stock markets enjoy a bit of a rally in 2024. Both the FTSE 100 and FTSE 250 have climbed by double digits since the start of the year after dividends. Yet there remain plenty of constituents that have been left behind on the back of weaker but potentially temporary performances.
Firms operating within the real estate, electronics, and manufacturing sectors are largely being ignored by investors. Higher inflation and interest rates have undoubtedly wreaked havoc across these industries. However, there are still plenty of high-quality enterprises in this segment of the stock market with the financial resources to weather the storm. And some have even been positioning themselves to thrive once 2025 comes around.
Providing these strategies prove successful, today’s discounted valuations may present terrific buying opportunities. And as almost every investor knows, the key to building wealth in the stock market is to ‘buy low, sell high’.
A FTSE 100 opportunity hiding in plain sight?
Being a member of the UK’s flagship index comes with a lot of advantages. Apart from enjoying the share price boost of being in passive index funds, FTSE 100 firms can often easily grab headlines, driving more interest in their business from both investors and customers.
However, right now, that doesn’t seem to be helping RS Group (LSE:RS1) all that much. As a critical distributor of over 750,000 components for manufacturing companies, RS Group has been hit with quite a few headwinds of late.
Manufacturing around the world has entered into a cyclical downturn as inflation reduces corporate and consumer spending. This is especially true for electronic devices like TVs and mobile phones that often come with higher price points.
As a consequence, its latest results showed flat revenue growth. Meanwhile, profit margins have taken a hit, sending earnings firmly in the wrong direction. However, it’s important to remember that past performance isn’t guaranteed to repeat in the future.
We’re already seeing trends that a manufacturing rebound could be underway now that interest rates around the world are starting to fall. That’s obviously terrific news for RS Group as demand for its services will naturally rise. What’s more, management’s large investment into the electronics industry through its Distrelec acquisition may perfectly position the firm to thrive once macroeconomic conditions improve.
Obviously, there are no guarantees since another spanner could be thrown into the works before 2025 comes around. However, with the share price down almost 40% since the start of 2022, a potential buying opportunity may have emerged, hence why I’m taking a closer look and researching the stock.
The post Don’t ‘save’ for retirement! I’d invest in dirt cheap UK shares to make a passive income appeared first on The Motley Fool UK.
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Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has recommended Rs Group Plc. 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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