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I've spent the last year buying bargain-priced UK shares within a self-invested personal pension fund (SIPP) with one goal in mind: I want the freedom to retire early and I believe building a portfolio of blue-chip shares is the best way to achieve this.
I'm not saying I'm going to retire soon, because I like what I do for a living. I just want it to be a possibility, for example, if I get sick, get tired or feel like taking things a little easier.
If I had £20,000 to spare (I wish!) I wouldn't wait around. I'd go buy FTSE 100 Index actions at this time.
I'm buying FTSE 100 bargains
Time is of the essence for three reasons: First, the sooner I start investing, the more time my money has to grow.
Secondly, now seems like a brilliant time to buy FTSE 100 shares at affordable prices, before the next stock market bull run begins.
Finally, I think the uptrend is getting closer, as interest rates fall and international investors realise the opportunity the UK offers. Global fund managers are now overweight UK equities for the first time since July 2021, according to Bank of America's global fund manager.
I think the FTSE 100 bank NatWest Group (LSE: NWG) is a shining example of the value that UK stocks offer.
Big banks have been out of favour since the 2008 financial crisis, but are now staging a comeback.
NatWest's share price has risen 43.28% over the past year, but it still doesn't look expensive, trading at 6.87 times earnings. The average FTSE 100 stock is more than twice as expensive, trading at 15 times earnings.
Better yet, NatWest offers the potential for a steady stream of dividend income. Today, the stock has a cumulative yield of 4.92%. This is forecast to rise to 5.41% over the next year and 5.58% the year after that. Hopefully, this is just the beginning.
High and growing passive income
In the case of shares, nothing is guaranteed. NatWest still needs to continue generating a lot of cash to fund shareholder payouts. Net interest margins – the difference between what banks pay savers and what they charge borrowers – are likely to fall when the Bank of England cuts rates, potentially reducing profits.
Still, I continue to believe that, taking a long-term view, NatWest should deliver a tidy mix of revenue and growth.
I wouldn't invest my £20,000 in just one stock, far from it. I would diversify my investment into five different stocks, investing £4,000 in each.
For starters, NatWest could be complemented by an insurance company. Avivawhose shares yield an extraordinary 6.81%. I might add that the energy network National Networkwhich represents a yield of 5.28%. Both appear to be reasonably valued.
Consumer goods giant Unilever is getting back into shape after a difficult period. It offers solid growth and revenue prospects. I would round out my top five picks with the mining giant Rio Tintowhich looks cheap at 9.3 times earnings and has an excellent trailing yield of 6.48%.
Stock prices tend to be volatile in the short term, but history shows that they outperform all rival asset classes over time. That's why I base my retirement plans on them.
