If you’ve £1,000, or any other amount, to invest today, buying a basket of FTSE 100 stocks could be the best option. I reckon this approach is the easiest way for both beginners and experienced investors to grow their wealth over the long term.
Today, I’m going to explain how I’d invest the money in a selection of FTSE 100 companies.
Buying FTSE 100 stocks
The UK’s lead index is made up of the largest companies listed on the London stock market. Many of these organisations have been established for decades and are highly regulated. This means they’re less likely to result in losses for shareholders. Indeed, many smaller firms traded on the Alternative Investment Market (AIM) don’t offer the same investor protections.
With this being the case, I think the FTSE 100 is the perfect place to invest for savers who want to protect and grow their hard-earned money.
However, just because a company is listed on the FTSE 100 doesn’t guarantee it will produce positive returns for investors.
As such, I think it’s essential to hold a diversified basket of companies. This offers investors the best chances of making a positive return while minimising the risk of losses.
Buying the best businesses
I’d start by buying some of the market’s highest quality companies. These are businesses with globally diversified operations, strong balance sheets, and recognisable products and therefore may be the best long-term investments. FTSE 100 firms such as GlaxoSmithKline, Unilever, or BP, would all qualify.
Alternatively, investment trusts could be another strong option. These are essentially investment businesses which own a basket of stocks. Companies like the Law Debenture Investment trust provide a way for investors to hold a diversified basket of blue-chip stocks. Professional investors manage the portfolio.
But a blend of both investment trusts and FTSE 100 stocks could be an excellent way to build a long-term portfolio.
Investment trusts can also be a good way to own small- and mid-cap stocks. Investing in these companies can be a risky business. However, by holding a basket of stocks through a diversified investment trust, you can significantly reduce the risk of investing.
The bottom line
Overall, I think the best way to invest £1,000, or any other amount, today is to buy a basket of blue-chip FTSE 100 stocks. By using this approach, investors can build the foundations of a more extensive portfolio.
Blue-chip stocks can form the solid base. And once this is in place, investors can take on more risk by investing in other opportunities, such as small- and mid-cap stocks.
I reckon this is the best way to protect and grow wealth over the long term. By combining high-quality blue-chips and growth stocks, investors can maximise return potential while minimising potential downside risk.
