Best UK Stocks to Buy for 2022 (March Update)

best uk stocks to buy

Many investors want to know the best UK stocks to buy. However, many lose money because they don’t know what to look for when investing on the London Stock Exchange. This is made worse because people follow the wrong advice and end up compounding mistakes.

In this article, you’ll learn what you need to know to identify and buy the best UK stocks for profitable investing. But first, let’s dive into UK stocks I’ve been been watching recently.

Best UK stocks I’m watching right now

The stock ideas below are from my newsletter, Buy the Breakout. You can subscribe below and join 10,000+ traders and investors to get the next edition in real-time, for free.

  1. Dekel Agrivision (DKL)
  2. Pharos Energy (PHAR)
  3. Shorting punter favourites that will need capital

Dekel Agrivision (DKL)

Dekel Agrivision has featured in Buy The Breakout before. But the buy case has now materially changed and the stock is right below resistance.

Therefore, I’m including it again so it’s on your radar.

I’m long this stock having bought last week, and the reason for this trade is simple.

CPO prices.

These are pushing close to €1,800 – double Arden’s forecast for the year of €900.

With prices starting at €1,242 in the year my belief is that Dekel Agrivision is on track to beat these forecasts comfortably.

It’s true that the international CPO price is not the price that DKL gets.

However, the drivers for palm oil are clear.

The lack of sunflower oil supply from Ukraine has sent buyers to panic buying palm oil instead.

And even though the CPO market is almost 4x bigger than the ~$18.5 bn a year sunflower market – the key is that 75% of the world’s supply comes from Ukraine.

That means there is now a huge deficit in the market.

This is Economics 101.

Supply and demand.

When supply tightens, demand must increase.

Dekel is already trading on an expected EV/EBITDA of 4.8.

It’s growing, and the chart is now backtesting a breakout.

Basically, we’ve had a year of consolidation for the placing to digest.

Anyone who took the placing and wanted to sell has had plenty of time to do so.

Plus, there was a record volume day last week and the number of shares swapping hands is still high.

I am long and hopeful we see a breakout and a trend begin.

I could be wrong, but with the stock being cheap and there now being a material driver I think the risk/reward strongly favours the upside.

Positives:

  • Clear uptrend
  • Fundamental strength

Negatives:

  • Illiquid
  • Reliant on a high CPO price

Pharos Energy (PHAR)

I don’t know much about this company other than it operates in some exotic locations: Egypt, Vietnam, and Israel.

Most of the company’s revenue comes from Vietnam.

However, this to me would be a pure chart play.

The stock is breaking out of a long base built in 2021.

If the stock retraces, then you can get a far better trade entry than you can on the breakout.

Why?

Because buying the breakout retrace means you can buy closer to the danger zone.

The danger zone is the point at which we’re wrong on the trade.

Think about it.

If you buy at 30p (OK – only amateurs buy round numbers but bear with me) and your stop is 27p that means you’re risking 3p on the trade.

But what if you’re buying at 28p and your stop is 1p?

That means you’ve just decreased your risk by 66%.

And you’re getting more bang for your buck.

This is why you absolutely should be looking into the breakout retrace if you’re trading breakouts.

I don’t hold but it’s worth keeping an eye on.

Positives:

  • SETS traded
  • Strong oil and gas prices

Negatives:

  • Poor history
  • Operates in far away places

Shorting punter favourites that will need capital

Any stock that isn’t cash generative is reliant on funding.

And that funding is entirely dependent on sentiment.

When market sentiment drops, companies find it difficult to raise money and generate interest.

Naturally – when everyone is having fun and stocks are going up – companies don’t have any issues.

But spook the market and suddenly this is a problem.

Even though that the market has fallen – if you know a company needs cash then shorting it can be a good strategy.

However, most of these companies can be promotional.

So be careful.

All a stock needs is one good promotional RNS to get a spike.

If you’re going to short stocks like this then you need to keep an eye on liquidity.

And if you have any good short ideas – message me!

Positives:

  • Catalyst for price to move down
  • When punters get scared they all run for the exit

Negatives:

  • Most of these stocks are illiquid
  • One promotional RNS can cause a spike
  • Some punters will never sell which sees prices stay elevated
  1. The Works (WRKS)
  2.  R. E. A Holdings (RE.)
  3. OnTheMarket (OTMP)

The Works (WRKS)

The Works is an omnichannel retailer with its main presence in the UK. It sells books, jigsaws, and a whole range of other stuff that’s always reduced.

You never know what you’re going to get in The Works, which I suspect is part of the magic. It’s a treasure trove of goodies – a bit like the middle aisle in Aldi where you could find almost useless garden tools or a brand spanking new coffee machine at 50% off.

The company has been on my radar since November 2020.

It put out a great RNS in the backdrop of an uncertain environment.

The stock saw a quick jump and rally, but notice how the volume was much higher after the RNS than before it.

This was a sign of interest from other players in the market.

Since then, the stock has been in a stage 2 uptrend, offering plenty of breakout trades on the way.

I’m now looking for another trade here on the breakout of 52-week highs.

The stock recently posted an update where the company announced it’s trading ahead of expectations and pre-pandemic levels.

That last part is key.

The stock was a dumpster before the pandemic – so has something changed?

If the business is ahead of what it was doing prior to the pandemic, then there could be more to come from The Works.

The stock gapped up on that recent trading update and the price has stayed elevated.

So regardless of what I think, it’s clear the market is taking a view on this.

I think there could be another trade once the stock breaks out of that 73p high.

Stocks are for buying and selling, and that’s all I’m interested in for The Works.

This is not a high-quality business. It’s unlikely it ever will be.

But if the setup presents itself then I’ll trade it.

Positives:

  • A clear stage 2 uptrend
  • Stock trading ahead of expectations and pre-pandemic levels
  • Relatively strong balance sheet with no funding required

Negatives:

  • It’s a retailer that struggled pre-pandemic – what has changed?
  • Reasonably illiquid

R. E. A Holdings (RE.)

R E A Holdings cultivates palm oils in Indonesia with the production of crude palm oil (CPO) and crude palm kernel oil (CPKO).

It’s a company similar to Dekel Agri-vision (DKL) but unlike DKL which is trending sideways, RE. is already on the move.

Here’s the chart.

We can clearly see the stage 4 downtrend, transitioning into a long stage 1 base, before breaking out and beginning its ascent into a stage 2 uptrend.

This is why zooming out on the chart to see the bigger picture is always helpful. Small moves that look significant are shown to be noise in the grand scheme of things.

Here’s the base in more detail.

The stock traded sideways for well over a year, and prior to breaking out it was trading above all moving averages.

I should’ve done better here, because my alert for the breakout went off and I didn’t trade the stock because the spread was too wide.

The stock is up over 100% from this level and recently we’ve seen a pullback.

I’ve not looked too deeply into the company but CPO prices are significantly higher (which is also why DKL is on my watchlist).


The company logged average CPO selling prices of $696 in 2020 in the half-yearly report from last June.

Prices are currently in the $1,000-$1,200 range and so I would expect EBITDA to be significantly higher.

As for profit, it doesn’t matter to me.

The stock is clearly moving because of a catalyst. Whether the stock is profitable or not isn’t what’s important.

Remember what Paul Tudor Jones said: “At the end of the day your job is to buy what goes up and sell what goes down, so why does anybody give a damn about PEs?”

Paul Tudor Jones has done all right for himself. So I think I’ll listen!

Positives:

  • Cup and handle forming
  • SETS traded so can leave orders on the book

Negatives:

  • Operates in a faraway land
  • Reliant on high CPO prices

OnTheMarket (OTMP)

I’m pretty sure OnTheMarket featured in January 21’s Buy The Breakout.

And I’m still waiting for it to hit break out of its range.

Here’s the chart.

We can see it’s spent the entire year going nowhere.

This is why you need to have a damn good reason for buying stocks that haven’t broken out.

If you bought it in January 2021, you’ve now been holding it for an entire year, are probably bored to tears, and had your capital tied-up.

Timing your buys is important. Buy too early and you could be sat waiting around or even lose money because the stock isn’t a high probability setup.

It’s far better to buy right than buy cheap.

I know this triggers lots of people but in trading, you need to remove yourself from your emotions and commit to something that works.

And look, if you’ve found buying stocks that are going nowhere works – great! Keep doing it. I’m not telling people what they should do. I’m simply sharing my opinion and what works for me.

I’ve been hugely critical of OTMP in the past (and for good reason).

But with the new chief executive a turnaround has well and truly begun.

Average Revenue Per Advertiser is growing, as is traffic visits and average monthly leads. This should help with the declining number of average monthly advertisers listed.

If enough people check the OnTheMarket website, then this increases the attraction for listings.

And more listings brings more people checking the website, which again sees even more attraction for listings.

It’s a flywheel that works well – if the company can grow it without burning through cash for marketing.

The company’s cash position has actually increased to £10.7 million from £8.7 million – which suggests this is not the case.

That said, what matters to me is the chart.

I’ll let the analysts do the number crunching and I’ll buy the breakout.

Positives:

  • Cash flow positive
  • Green shoots appearing

Negatives:

  • SETSqx traded so illiquid
  • Reliant on a vibrant housing market – are people still willing to sell after the Stamp Duty holiday ended?
  1. Harvest Minerals (HMI)
  2. FTSE 250 UCITS ETF

Harvest Minerals (HMI)

Harvest Minerals is a Brazilian remineraliser company that produces a product called KP Fertil.

KP Fertil has shown to be a cost effective and superior alternative to fertiliser in various tests and is certified by the Brazilian Ministry of Agriculture, Livestock, and Supply (MAPA).

This is the gold standard and back in 2018 it was expected that this would open the floodgates to sales.

The problem was these sales didn’t materialise.

Around that time, the company raised money at 18p on the basis of a 50kt order of KP Fertil.

I entered this stock in a prior placing at 10p and liquified my entire position into the liquidity created from the MAPA certification news above 20p.

I believed that the company would need to place in order to ramp up production.

At the time, this seemed a fair price backed heavily by Brian McMaster.

But the sales didn’t appear and the price started a long fall.

I’ve marked an arrow from the day of the placing.

It also appeared that despite Brian’s vote of confidence, he was able to recoup this plenty of this investment through excessive consulting fees paid directly to his company.

Nice work if you can get it!

Unlike other stock commentators who get paid by the company, I don’t accept money from anyone which means I’m free to say anything I like.

And the truth is I don’t trust Brian McMaster.

Not only has he been earning a handsome wage for not delivering but the expectations set by the company were so out of whack with the reality delivered that it’s difficult to believe a word he says.

On a recent podcast, he’s suggesting that in 12 months the company could potentially be paying a dividend.

The problem is we heard that four years ago.

And whilst it’s fair to say that the company lost a year due to a Covid still the trust is now non-existent.

The good news is though that this is reflected in the share price and offers a potential opportunity.

The market was heavily excited about the 50k order at 20p yet Harvest announced in October 2021 that it had beaten its 80kt sales target two months ahead of schedule.

Here’s the chart from the start of 2019.

The stock fell 90% from the placing at 18p but since then has built a base.

The stock has now pushed through into prices not seen since 2019.

I’m long a small position here because I see this as a significant breakout.

McMaster says that no placing is needed (although I can’t reconcile that statement with the accounts) and that the company is profitable at 40kt of product sold.

I would expect this to be cash earnings and net profit, but McMaster has said the company is targeting at least 100kt next year with the official numbers due to be confirmed this month.

The product sells at 200R$ per ton.

100,000 tonnes is $3,548,618 in revenue.

Looking at the 2020 income statement, I struggle to see how even at 100kt the company will be profitable.

The gross margin is 63.6%.

Apply that to 100kt and we get $2,256,921.

If we assume all costs are the same and don’t increase (unlikely) then that leaves the company loss-making by more than $2 million.

This contrasts quite differently to McMaster’s own words: “We’re selling in excess of breakeven [40kt]. We’re making profit. Full stop.

He also says that it’s difficult to get a true picture of how the company is performing from the audited accounts, so who knows?

Maybe I’m wrong here as McMaster did say only last month that the company doesn’t need funding, but I think there is a placing risk here.

I’m long because of the chart but I think caution is needed.

Don’t forget the currency risk either as the Brazilian Real Harvest operates in has performed poorly against the US Dollar that the company reports in.

Positives:

  • A simple product that is dug up and bagged
  • Over a 100 year life of mine at 400kt of production
  • The company is making inroads with increasing sales

Negatives:

  • Board that has failed to deliver what it promised
  • Executive Chair that can’t lose due to remuneration
  • Potential placing coming

FTSE 250 UCITS ETF

You’re probably surprised to read about an ETF in a trading article.

But I’ve had a few questions recently regarding funds.

Personally, I don’t buy funds.

I prefer to actively manage my own capital.

But if I wanted to outsource my investing, here’s what I would do.

  1. Open a Vanguard Stocks & Shares ISA
  2. Buy FTSE 250 UCITS ETF
  3. Consider buying S&P 500 UCITS ETF
  4. Drip feed through direct debt all year with my ISA allowance

These funds charge low fees because they’re passive.

That means you’re not paying someone a high fee for them to mostly fail to do the job they’re supposed to do and beat the market.

It’s odd because financial services seem to be the only place where you can fail and still get paid well.

That’s because so many people want to beat the market, they’ll take the risk and pay a lot to try and do it.

But the best thing to do is not to buy actively managed funds but to just buy trackers and sit tight.

Back in 2008, Warren Buffett made a $1m bet that over ten years the Vanguard S&P 500 index fund would beat a portfolio of high-cost hedge funds picked by Ted Seides.

Seides conceded defeat a year early – here are the results.

Not a single fund bested the index.

Buying your own stocks is fun. But buying your own stocks takes time.

Owning a tracker fund is less time-consuming, less stressful, and potentially the more profitable option for some people.

How to find the best stocks to invest in right now?

To understand the best UK stocks to invest in we need to understand that there are two markets in the UK.

There are FTSE stocks (Main Market) and also the Alternative Investment Market (AIM).

Main Market stocks have tighter regulation and can be considered safer, but this can be a hindrance for growth. This market contains the largest companies in the UK and these tend to be companies with strong business models and established cash flows. Stamp Duty is paid on Main Market stocks.

The market capitalisation for companies on AIM tends to be much smaller as these are typically small-cap companies. Retail investor accounts are more attracted to these because of the higher upside. However, these companies often do come with high risks.

Here is a company that was a successful investment from its IPO: Fevertree.

Source: SharePad (risk-free trial and 1 free month worth £69 through me here)

Fevertree is an asset-light company because it’s a brand. The company outsources all of its production and instead invests capital in marketing and selling the product.

This means that there are no large capex expenditures on purchasing and maintaining machinery and profits were reinvested for growth.

We’ll look at finding hidden winners later on in this article.

Should I invest now?

Investing is a long term business and the best time to start was yesterday. However, the next best time is now to give yourself as much time in the market as possible.

That said, investing depends entirely on your own personal financial situation and goals.

If you might need the capital within five years, then investing may not be suitable for you. This is because financial markets including stocks can go up and down. Needing to withdraw the money when the market is weak could mean you get back less of what you originally invested.

Many markets can appear overvalued and make it difficult to commit.

One way of getting around this is to use a method called ‘Dollar Cost Averaging’.

What is Dollar-Cost Averaging?

Dollar-Cost Averaging is an investment strategy whereby investors divide up the total investment across a specific period of time. This has the advantage of reducing volatility on the investment.

For example, if we were to buy a stock all in one go and then the stock fell -20%, we would not be able to take advantage of the dip.

However, if we used dollar-cost averaging, then we’d be buying the stock every month regardless of the stock’s price and smoothening our average.

Dollar-Cost Averaging is effective for long term investment strategies such as committing a portion of your salary to the stock market. It means you don’t need to time the market because every month you’re investing the same amount of money. 

Dollar-Cost Averaging is popular with index tracker fund ETF investors.

How to find stable investments?

Investing in stocks can be a tricky business. This is because there are an endless amount of mistakes one can make if you don’t know what you’re doing.

However, we can reduce our investment risk by finding stable investments.

One of the big problems with investing in popular growth companies is that the businesses are often not profitable and also reliant on external cash injections through placings

By avoiding these companies, we dramatically increase our chances of success in the stock market because we are removing one of the biggest risks.

In order to find stable investments, we need to:

  • Check the company’s balance sheet
  • Check the company’s cash flow statement 
  • Check the company’s income statement

Checking the company’s balance sheet

The balance sheet tells us all about the company’s financial health. Buying companies with strong balance sheets and avoiding balance sheets that look like a car crash is one good way to avoid underperforming companies.

Of course, there will be some companies with poor balance sheets that have exceptional stock price performance, but this does not mean they are stable investments. 

Companies that had strong balance sheets coming into the Covid-19 pandemic did not need to raise as much (if any) new capital by selling shares. Uncertainty was reduced in these businesses because they didn’t need to rely on external funding to survive.

Greggs was awash with cash before the crash and so whilst the stock price suffered a sharp drop, it recovered quickly and pressed onto new highs. It was a Covid-19 winner making new all-time highs.

Source: SharePad (risk-free trial and 1 free month worth £69 on me here)

Understanding a balance sheet is key to finding profitable investments. Here’s my walkthrough on knowing your way around a balance sheet

Checking the company’s cash flow statement

You may have heard the saying: “revenue is vanity, profit is sanity”. Often with this phrase, the last (and most important) clause is left out: “cash is reality”.

Profits are easy to manipulate and do not represent cold hard cash in the bank. 

The cash flow statement of a company describes how cash moves through the business and how much cash the company is burning/generating through the course of its operations, investments, and financing. 

You can go through my cash flow statement tutorial here.

Checking the company’s income statement

The company’s income statement shows the financial performance of the company. It details the company’s revenues, costs, and profits (or lack of profit).

As I said earlier, profits are easy to manipulate and management can make these numbers up at their own discretion through the use of their depreciation and amortisation policies. Revenue recognition can also play a part in the final bottom line number, as well as putting costs onto the balance sheet (otherwise known as a capitalised cost). 

For example, there is one mining company that is listed on the UK stock market that has claimed exploration costs as an intangible asset.

I would say that it has spent millions on drilling holes into the ground with nothing to show for it, but management believes that this is somehow an asset. This means the cost doesn’t go through the P&L on the income statement and instead sits on the balance sheet. 

How to determine a profitable investment

There is no crystal ball that tells us which stocks are profitable investments.

But here is a checklist of some of the things that I look out for when investing. r, we can use a checklist to give ourselves the best chances of success. 

  1. Does the company have management with skin in the game?
  2. Does the company have a moat that protects it from competitors?
  3. Can the company scale and grow bigger?
  4. Is the company reliant on large key customers?
  5. Does the company have a strong balance sheet?
  6. Is the company actually profitable?

Does the company have management with skin in the game?

Put simply: if a company’s directors have no interest in buying shares then why should I?

Directors that buy large amounts of stock themselves in order to make a profit from the company’s stock price going up is always interesting to me.

That’s because it’s clear that our interests are aligned in wanting the share price to rise rather than using the business as a lifestyle.

That said, directors can also award themselves generous options packages and say they’re “aligned”. But it’s never the same as putting money on the table and getting skin in the game. 

If directors aren’t buyers at all then think twice before you become one. 

Does the company have a moat that protects itself from competitors?

A solid investment needs a moat that can protect itself from investors. An economic moat, as coined by Warren Buffet, offers a competitive advantage in business from its competitors. Imagine a castle as the business, and the moat protects the castle. 

For example, The Coca-Cola Company’s moat is their flagship brand Coca-Cola and its entrenchment into almost every society and social culture. 

Apple’s economic moat is its innovation and ability to continuously see what the consumer will want and create it before they know it, as well as its ecosystem which hooks people in with its ease. They did it with the iPhone. They did it with the iPod. The chances are that Apple will do it again!

High margin businesses often attract competitors due to their potential to make plenty of money. 

A company with a high margin business and no economic moat will see those high margins deteriorate and eventually be eroded by competition. 

Economic moats are important because without one there is nothing to stop competitors coming in to steal market share. 

This happened to Safestyle UK, a company that was involved in the manufacture, sale, and installation of plastic windows throughout the UK. They were highly profitable and made a lot of money, until a competitor realised that they could do the same too! Safestyle’s share price plummeted because they did not have an edge over the competition.

If we invest in a company that does not have this moat then we leave ourselves wide open to attack.

Is the company able to scale and grow bigger?

This point is often overlooked by private investors yet it is of paramount importance. 

If a company cannot scale and grow bigger then where are those future growing profits going to come from? A company can increase its profits by cutting costs, but that is limited. There is no limitation on how big a company can grow.

We can look at a company’s potential growth by looking at how much market share they have, how big the potential market is, how big the potential market can grow. We can look at overseas markets and look at if the company could grow there.

Another way to look at a company is operational gearing. This is where a company benefits from fixed costs regardless of revenue. This could be a pub chain that has to pay the rent on the leases regardless of custom coming through the door. It could be a technology company, which has a fixed cost platform irrespective of how many users are signing up. 

Whilst operational gearing is fantastic when plenty of punters are coming in through the doors and users are signing up to a fixed cost platform en masse, we must be careful because operational gearing is a double-edged sword and works both ways. If the pub chain is struggling and revenue is in decline it must still pay the rent on the lease. Likewise, the tech company still needs to support its platform otherwise it will lose all revenue!

Companies that benefit from operational gearing can also see margin improvement too. We calculate margins by taking the profit (revenue minus costs) and dividing this by the revenue. 

A company turning over £1,500,000 on a fixed cost base of £1,000,000 is making £500,000 on a margin of 33.3%. If that company was to grow their revenue to £2,000,000, an increase of 33.3%, they would actually increase their operational profit by 100% going from £500,000 to £1,000,000! Furthermore, their margins would also increase from 33.3% to 50%.

A company that can scale and that can grow bigger can continue its growth for many years and see dramatic appreciations in its share price.

Does the company have steady recurring revenue or is the company at risk of large revenue loss?

When investigating a company we should always look at the company’s revenue source and potential pitfalls. A company that has recurring revenue has the revenue streams already onboard, which can be projected into the future. The revenue that is recurring will only leave should the company no longer provide an adequate service for their price or compared to competitors.

Companies that rely on certain clients for a large percentage of their revenue are at risk should that client terminate or decide not to renew that contract. The client can even go bust and leave the company with a liability, as they have done the work but not collected the cash.

I warned on this about a company that signed up a large contract. It failed to collect the cash and went bust in less than six months after this tweet.

It is not necessary to have a recurring revenue business model. Companies can do very well providing a repeated service to customers over several years, for example support services companies. However, it is necessary for us to be aware of the risks of large clients for the company. We can check detailed descriptions of the revenue breakdown in the Annual Report.

Does the company have good assets or a strong balance sheet?

Companies that have weak balance sheets or poor assets leave investors at risk of being out of pocket. Balance sheets are covered in Chapter Seven. Weak balance sheets can mean not having enough cash in order to cover working capital, which means the company has an unexpected cash call where they are not able to function in their day-to-day operations. It can also mean they are laden with debt that they might struggle to pay off if they were to lose a client from the business. Remember, if the owners of the debt want to recall their borrowings, and the company cannot renegotiate elsewhere, the company can go bust!

Poor assets can mean that capital expenditure is required in order to improve them. For example, a restaurant chain’s units may be outdated and deteriorating badly. If the chain does not deploy capital in order to freshen up and improve their units, customers may end up going elsewhere! In the same manner, a software company that has not invested in their platform may have an asset that is now far behind the competition, and will soon no longer provide an edge and become useless.

We should always check that a company has enough cash or cash equivalents to sustain its operations, and always make sure that the company has good assets. 

Is the company profitable?

If a company is not making a profit then it cannot deliver any dividends for shareholders. It is also unlikely to grow sustainably into the future and may be at risk of issuing further equity and diluting shareholders.

Some companies like to make it harder for us to see if they are profitable or not. For example, a company with a £9 million loss may then dispose of an asset for £10 million. This would mean the company would report a profit of £1 million despite the fact that the asset sale has nothing to do with their core business. If this asset sale was a one-off sale and therefore exceptional, the company’s real bottom line was a £9 million loss! 

It’s not enough for us to just look at the bottom line (profit). We need to look higher and see how that figure was reached. Companies that capitalise costs (put costs onto the balance sheet rather than through the income statement), and companies that make non-recurring asset sales for cash, can all report a profit and give a false picture of the true state of the business.

What are the safest shares to buy

The safest shares to buy are often stocks that meet the checklist above. 

This is just a general checklist and you can create your own, but profitable companies that have strong balance sheets and an economic moat, are able to scale and don’t have significant customer risk, that are run by management with skin in the game often outperform stocks that don’t.

Look for shares that also have a strong Return On Capital Employed (ROCE).

You can think of ROCE as the company’s own interest rate. It’s the rate of return that the company received on capital employed within the business. 

ROCE looks at the company’s capital efficiency and a high ROCE ratio is a typical trait of a successful stock. 

It’s worth noting that there are many subscription services out there that claim to be able to tell you the best stocks to buy if you only sign up for a monthly fee.

The reality is companies such as The Motley Fool UK rely on these subscription fees to make money, and not by investing in the stocks its writers pick. 

You should also be careful of share advisors and stockbrokers. Personally, I find it difficult to see how an Independent Financial Adviser (IFA) can be independent when they make a commission selling a certain product. I’m sure many IFAs are reputable and do have their clients’ best interests at heart but it is something to be wary of.

Should I invest in more stocks

I’m no financial adviser and so I can’t offer advice. 

However, my opinion is that you should assess your own financial situation.

The stock market should be viewed with a timeframe of at least five years and more – therefore if there’s a chance you need the money before that time period then you shouldn’t invest.

But over the long term, the stock market compounds wealth and will continue to do so if you believe that the economy will always grow and prosper over the long term.

The best shares will be able to navigate any economic environment and any short-term setbacks can provide a timely opportunity.

There will always be booms and busts – hence the long term mindset required to ride out the troughs and profit on your investments. 

How many shares should a beginner buy

Many beginner investors often get the terms stocks and shares confused. This is understandable because even the UK government calls the investment ISA a “Stocks & Shares ISA”.

Stocks is the plural of a company’s stock – meaning that if someone has invested in three stocks then they have three separate investments.

However, if someone says I have three shares, what they should mean is that they have three shares in one company. 

I believe that for beginner investors who don’t want to invest in low-cost passive index tracker funds then 10 stocks is a good number to aim for an investment portfolio.

This is because having 10 different investments diversifies your portfolio and reduces your individual company risk.

For example, if one company has a profit warning or issues other bad news, then the stock’s share price will likely fall in value. But if you have 9 other companies, this diversification reduces the total downside across your account.

10 companies also gives enough diversification against sector risk – unless all 10 of your stocks are in the same sector!

Where should I invest my money now

I’m not a financial adviser and can’t offer advice. Firstly, because it would be illegal. And secondly, I have no wish to have any responsibility for your investment portfolio.

However, the companies I’m investing in today are companies that have strong macroeconomic tailwinds. They have strong balance sheets and are solid investments.

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