Why The FTSE 100 Is A Top ISA Buy

You should consider the FTSE 100 (INDEXFTSE:UKX) for your ISA.

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The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Today I’m going to reveal quite possibly the very best investment you could make for your ISA right now.

The expert investors among you may sigh with disappointment, but for the rest of us without the time and skill to pick stock-market winners…

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…buying into the FTSE 100 (FTSEINDICES:^FTSE) is the easiest way to benefit from the long-term power of the stock market.

stock exchangeYou can track the FTSE 100 through a wide number of funds, including exchange-traded funds such as the iShares FTSE 100 ETF (LSE: ISF), the DB X-Trackers FTSE 100 ETF (LSE: XUKX) and the Vanguard FTSE 100 ETF (LSE: VUKE).

And even the world’s richest investor, Warren Buffett, remains a fan of ‘index tracking’. He wrote this earlier in the month:

The goal of the non-professional should not be to pick winners… but should rather be to own a cross-section of businesses that in aggregate are bound to do well. A low-cost […] index fund will achieve this goal.

Buy into the FTSE 100 and you will own a cross-section of top British businesses that I’m sure is bound to do well over time.

I mean, you’ll back blue chips such as Royal Dutch Shell, HSBC, GlaxoSmithKline, Vodafone, Diageo, Unilever, British American Tobacco, ARM, Next, Hargreaves Lansdown… alongside another 90 bellwether UK stocks all rolled into one simple fund.

It really is the ‘no-brainer’ investment decision of this ISA season — and every other ISA season beyond that.

And when you consider…

  • The FTSE 100 is currently paying a dividend yield of 3.5%, much higher than the interest paid on a typical Cash ISA;
  • Dividends from FTSE 100 companies are expected to advance 6% on aggregate this year, according to Capita Asset Services;
  • The FTSE 100 index trades at about 13 times the profits made by all 100 companies, which is seen as ‘below average’ by many investors and could mean the market is undervalued, and;
  • The FTSE 100 index remains below its record high of 6,930 set at the end of 1999, which suggests the market has some catching up to do.

…then it would seem there is no better time to buy than right now. In fact, by backing the entire FTSE 100, you’ll be able to sit back, relax and simply prosper from the wider market’s progress…

…without the worry of your hand-picked shares hitting trouble or your hand-picked fund manager going off the boil.

And there is a lot to be said about that!

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Maynard does not own shares in any of the companies mentioned. The Motley Fool owns shares in Unilever and has recommended shares in GlaxoSmithKline.

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