Why I’d invest £5,000 now in UK shares in an ISA to make a passive income

first_img Peter Stephens | Tuesday, 16th February, 2021 Making a passive income from UK shares has become more difficult over the last year. The coronavirus pandemic prompted financial uncertainty for many companies across the FTSE 350. This resulted in reduced dividend payouts, or even a cancellation of dividends in some cases.However, the economic outlook is set to get better. This may mean improved performances for many businesses that lead to higher dividend payouts. Alongside the capital growth potential of UK stocks, this could make now the right time to invest £5,000, or any other amount, in a diverse selection of income shares in an ISA.5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…And if you click here we’ll show you something that could be key to unlocking 5G’s full potential…Buying UK shares to make a passive incomeDespite many UK shares cutting their dividends, it is still possible to make a generous passive income from FTSE 350 shares. In fact, both the FTSE 100 and FTSE 250 trade lower than they did a year ago. As such, some of their members have share prices that are down on their previous highs. This could mean that they now offer higher yields than they did a year ago – as long as they have been able to maintain their dividend payouts.This could mean that it is possible to obtain a 4% or 5% average yield from a portfolio of UK stocks. In a low-interest-rate environment, this could be a relatively high income return. It also has the capacity to rise at an above-inflation pace over the coming years. The world and UK economies are widely forecast to recover strongly as vaccine rollouts continue. This could prompt improving operating conditions for many UK shares that allow them to pay higher dividends over the long term.UK stocks could offer capital growthInvesting £5,000 in UK shares could also be a shrewd move because of their capital growth prospects. Many FTSE 350 shares trade on valuations that are significantly below their historic averages. This could signal that they offer wide margins of safety that produce relatively high returns. Since the stock market has historically reverted to its long-term average values, buying today’s cheap shares may be a profitable move.Doing so through a tax-efficient account such as a Stocks and Shares ISA could offer further improvements to returns. The lack of capital gains tax or dividend tax charged on investments in an ISA may widen the gap in total returns versus a bog-standard share dealing account.Risk managementOf course, there is never any guarantee of a passive income or capital growth from a portfolio of UK shares. They could experience very tough operating conditions in future that are not fully reflected in their current valuations.However, with dividends forecast to grow in the coming years, yields being high in a low-interest-rate environment and the economic outlook expected to improve, UK stocks could offer impressive total returns in the long term. Our 6 ‘Best Buys Now’ Shares FREE REPORT: Why this £5 stock could be set to surge Simply click below to discover how you can take advantage of this. Get the full details on this £5 stock now – while your report is free. Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we’re offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our ‘no quibbles’ 30-day subscription fee refund guarantee.center_img Are you on the lookout for UK growth stocks?If so, get this FREE no-strings report now.While it’s available: you’ll discover what we think is a top growth stock for the decade ahead.And the performance of this company really is stunning.In 2019, it returned £150million to shareholders through buybacks and dividends.We believe its financial position is about as solid as anything we’ve seen.Since 2016, annual revenues increased 31%In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259Operating cash flow is up 47%. (Even its operating margins are rising every year!)Quite simply, we believe it’s a fantastic Foolish growth pick.What’s more, it deserves your attention today.So please don’t wait another moment. Why I’d invest £5,000 now in UK shares in an ISA to make a passive income Enter Your Email Address I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement. See all posts by Peter Stephenslast_img

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