We’re halfway through the year and what a six-month period it has been for most FTSE 100 investors. The pandemic has had a significant impact on equity markets. Following the initial rapid falls in broader indexes in February and March, many shares have since come back to recover some of their losses.
I believe the current volatility is likely to be a near-term headwind. Most economies, as well as FTSE 100 shares, will improve in due course, possibly sooner than later. In the past, stock markets worldwide and in the UK have created massive wealth for long-term investors. They are likely to do so in the future, too. Let’s take a closer look.
How investments have fared over time
Market crashes, in general, provide an opportunity to buy FTSE 100 stocks at cheaper valuations. Therefore, investors with a long-term horizon should do their due diligence to identify stocks with strong fundamentals, growth potential in their respective markets, and robust cash flows.
For example, let us assume you had invested £1,000, 10 years ago, in July 2010, in several FTSE 100 shares. Below, I’d like to show you how much your investment would be worth now, based on a buy-and-hold strategy and share price appreciation:
- Aveva: £3,080
- Bunzl: £3,200
- Halma: £8,250
- Hikma Pharmaceuticals:£3,250
- JD Sports Fashion: £16,700
- Mondi: 3,700
- Ocado: £12,900
Put another way, a modest investment in a range of companies would have meant a sizeable capital appreciation. And these numbers hold despite the market drop since early 2020
If history were to repeat itself, we could expect many FTSE 100 shares to make new highs within the decade. And if there is another market crash in the rest of the year, or at a later date, seasoned investors realise that it means the opportunity to buy solid companies at a discount. And that would mean the road to greater wealth in later life.
Which FTSE 100 shares
Warren Buffett is one of the world’s most renowned investors. One of his famous quotes is, “Be fearful when others are greedy and be greedy when others are fearful“. In other words, those investors who buy shares when others are selling en masse are likely to do well in the markets.
I expect the stocks whose names and metrics I have listed above to do well in the coming years, too. Therefore I’d look to buy the dips.
We mostly invest for future goals, such as saving for a deposit on a home, for retirement, or simply gaining financial independence. As part of your investment aims, are you looking for defensive names that are likely to provide stable returns coupled with dividends?
Then there are several other FTSE 100 stocks I’d consider buying as well. I believe they’d help ready my portfolio for whatever comes next. I regard AstraZeneca, BAE Systems, British American Tobacco, GlaxoSmithKline, National Grid, Pennon Group, Unilever, and Vodafone as solid picks for a long-term personal portfolio.
Finally, investors who don’t have the time or expertise to keep track of individual stocks can invest in FTSE 100 trackers or liquid exchange-traded funds. For example, the iShares UK Dividend UCITS ETF is a basket of the 50 highest-yielding stocks from the FTSE 350 Index. Such a dividend-oriented ETF could be appropriate for most portfolios. Another ETF to consider could be the FTSE All-World ETF, tracking the performance of a large number of stocks worldwide.
