UK shares: is there nonetheless cash to be made?

Picture supply: Getty Photographs

Recently, the FTSE 100 index of main UK shares has been performing properly. So properly, the truth is, that it hit a brand new all-time excessive in current weeks.

Understandably, that ought to offer buyers pause for thought. Would possibly British shares now be overvalued, presumably even heading for a crash?

That’s, as at all times, a risk – simply as it’s also a risk that costs will rise even farther from right here.

No matter occurs to the flagship blue-chip index, I see a number of causes to imagine that there might nonetheless be cash to be made out of investing in UK shares.

A market of particular person shares

The FTSE 100 tells us what a group of shares within the nation’s largest corporations is doing.

Nevertheless it doesn’t inform us how every of these particular person shares is performing, not to mention these outdoors the FTSE 100.

For instance, think about Diageo (LSE: DGE), a longstanding FTSE 100 constituent. Its shares have had a depressing 2025 to this point. They’ve additionally carried out woefully over the previous 5 years.

That doesn’t essentially imply that Diageo shares will not be overvalued. Irrespective of how far down a share goes, it will possibly nonetheless go down additional (till it hits zero, that’s).

Diageo clearly has challenges, from weak demand for premium spirits in key markets to a longer-term pattern of youthful shoppers shunning alcoholic drinks.

Nonetheless, it’s among the many UK shares I’ve been shopping for this yr exactly as a result of I see it as undervalued from a long-term perspective. It’s massively worthwhile, has a steady of premium manufacturers, and a demonstrated experience in constructing model loyalty.

Dividends additionally matter

One other approach by which I believe there may be cash to be made out of proudly owning UK shares within the present market is because of the energy of dividends.

FTSE 100 shares alone pay out properly over £1bn per week on common in dividends.

Dividends are by no means assured to final. However many corporations pay them repeatedly for many years.

In truth, some companies even elevate their dividend per share yearly for many years. Diageo is one such share – and its 4.5% dividend yield is at the moment properly above the FTSE 100 common.

Constructing in a margin of error

With the inventory market in clover, it may also be useful to recollect some phrases of knowledge from billionaire investor Warren Buffett.

He takes a long-term method to investing, aiming to purchase shares in what he sees as nice companies at enticing costs, then holding them for years or a long time.

Alongside the best way, after all, share costs could transfer round significantly.

When valuing shares, Buffett at all times tries to construct a ‘margin of safety’ into his calculations.

Doing that signifies that, even when the share experiences some steep value falls whereas he holds it, so long as his long-term funding thesis concerning the firm has not modified, he needn’t lose sleep over it.