The FTSE 100 is soaring! Here’s why I don’t think it’s too late to make a million

I think the FTSE 100 (INDEXFTSE:UKX) could offer further growth potential.

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.

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The FTSE 100 has made a strong start to 2019. In the first eight weeks of the year, it’s risen by around 6%, a significant improvement on its performance in the second half of 2018.

Of course, the index technically remains in a bull market which has now lasted for around a decade. During that time, a number of investors have generated impressive returns in a period where the world economy has performed exceptionally well – especially in recent years.

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While new investors may feel they’ve missed out on the gains generated by the FTSE 100 in the last 10 years, the reality is that there could be more upside to come from the UK’s main index. As such, there’s still be an opportunity to make a million.

Bright future

The world economy is currently performing relatively well. The US economy is generating impressive levels of growth, considering that it’s part-way through the cycle of raising interest rates. Likewise, China’s economy may be undergoing a transition to a slower growth rate, but continues to outperform most of its major economic rivals. Similarly, the emerging world appears to have significant growth potential over the next decade, with countries such as India set to record high wage growth which could increase demand for a variety of goods and services.

Therefore, even though the current bull market has lasted for a relatively long period of time, there could be much more growth to come. Since the FTSE 100 is an internationally-focused index that generates most of its revenue from outside the UK, it could be in a strong position to trade at a higher level over the coming years.

Dividend potential

With a significant part of total returns over an extended time period derived from the reinvestment of dividends, the income appeal of the index could indicate that there’s investing potential on offer. The FTSE 100 has a dividend yield of 4.4% right now. However, an investor seeking to build an entire portfolio of stocks which have yields of 5% or more would not find the task especially challenging.

Since a number of today’s high-yielding shares also offer strong dividend growth rates, their share price performance could improve. A high yield may also suggest that they offer a wide margin of safety, which may lead to capital growth over the next few years. And, with UK interest rates expected to remain low over the medium term, the relative appeal of large-cap shares, compared to other assets such as bonds and property, could continue to be high.

Outlook

While there may continue to be uncertainty in the performance of the FTSE 100, it appears to have an encouraging outlook. Global economic growth could remain robust and help to propel the index higher. Meanwhile, a high yield suggests there could be income and value opportunities available, even after the index has surged higher over the last decade.

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