As UK shares soar, is it time to consider selling?

The FTSE 100 has stormed to over 9,000 points, and some of us must be wondering if it’s time to sell UK shares. It could could bag us a five-year gain of close to 75%, including dividends.

But what counts is valuation.

What about Lloyds Banking Group? That’s up more than 50% so far in 2025 alone. There’s a forward price-to-earnings (P/E) ratio of over 12 for the full year now, with the forecast dividend yield down under 4%.

I saw Lloyds as a screaming bargain a few years ago. But I’d say it’s far from a no-brainer now. With the uncertainties around economics and interest rates, I don’t see much safety buffer left. And I do see better dividend prospects out there.

I won’t sell my Lloyds shares — but that’s because forecasts for the next few years predict strong earnings and dividend growth. Without that, there’d be other stocks I like better for the money.

Fear of missing out

The fear of missing out (FOMO) can drive stock prices up. There has to be a lot of that behind the artificial intelligence (AI) boom in the US that keeps pushing the Nasdaq up to ever higher levels. And I can’t help seeing some of it in Rolls-Royce Holdings (LSE: RR.) here.

The business recovered remarkably well. And people are still bullish about it, even after a rise of more than 1,000% over five years.

Where does that FOMO thing come in? We need to be honest about our reasons for buying a stock. I’ve seriously considered Rolls-Royce a few times. But each time, it’s been well into its current bull run. And — honesty time — I’d been kicking myself for having missed out.

I recognised that and I held back. Perhaps ironically, that recognition actually led me to miss out on later gains. But that’s fine. I’ll never lose money by missing out on a boom — but I might if I get in too late out of that fear of missing out. And it means I’m not considering buying Rolls-Royce shares now, so I’ll miss any new surge.

What about investors who think the Rolls P/E of 42 is still good value based on what they think the business can achieve in the long term? They should clearly consider buying. I’d just urge anyone to examine any emotional side to investing decisions carefully. And only ever buy for the right reason.

So sell or what?

To get back to my headline question, I don’t ever recall a time when I’ve not seen stocks I rate as good value. My current considerations include Taylor Wimpey — on a high P/E now, but forecast at 10.5 for next year, and with a predicted 9.3% dividend yield. Mortgage rate pressure’s a reason for caution though.

I’m also thinking of adding Legal & General to my Aviva holding. An 8.4% dividend yield? Yes please. Cover by earnings is likely to be thin at best for a few years, so I’d be taking a risk on long-term outlook optimism.

But in short, no, I don’t see it as a time to think of selling out — just a time to be extra careful of valuations.

The post As UK shares soar, is it time to consider selling? appeared first on The Motley Fool UK.

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Alan Oscroft has positions in Aviva Plc and Lloyds Banking Group Plc. The Motley Fool UK has recommended Lloyds Banking Group Plc and Rolls-Royce 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.