The past performance of the FTSE 350 shows it has always experienced a long-term stock market rally following challenging economic periods. Even though it has already partially recovered from the 2020 market crash, there’s still some way to go before it posts fresh record highs.
As such, now could be an opportune moment to buy stocks ahead of a likely long-term bull market. Through buying the best shares now, it may be possible to reduce risks and capitalise on undervalued growth opportunities that improve an investor’s financial prospects.
Identifying the best shares in this stock market rally
Clearly, determining the best shares to buy now is very subjective. However, they’re likely to be those companies that have yet to fully recover from the 2020 market crash. They may have scope to deliver high capital returns in a long-term stock market rally. After all, an improving economic outlook tends to create stronger operating conditions for industries that have struggled over the last year.
Identifying such companies could be achieved by comparing their current valuations to historic averages. Similarly, a company that has a lower valuation than sector peers despite having an equally sound financial and market position could indicate there’s scope for it to outperform its industry rivals.
The best shares to buy now may also have the right strategies to capitalise on a changing global economy. Many industries are likely to have changed significantly following the coronavirus pandemic. Those businesses that can remain flexible in their response to evolving customer tastes may be able to outperform the wider index in a long-term stock market rally.
Drip-feeding money into UK shares
Slowly buying stocks, rather than investing a lump sum, could be a prudent move at the present time. The FTSE 350 is very likely to make new record highs in the long run via a stock market rally. But the fluid economic situation means there may be some bumps along the way. This may mean there are even more attractive buying opportunities in the coming months that are more readily available to regular investors.
The past performance of the stock market shows that regularly buying shares can be a sound means of generating high returns. For example, the FTSE 250 has delivered an annualised total return of 9% in the last 20 years. The same return on a £500 monthly investment would produce a portfolio valued at over £560,000 over 25 years.
However, through buying the best shares in attractive sectors, it’s possible to outperform the wider market over the long run. I believe there are many buying opportunities still available ahead of a likely long-term stock market rally. So now could be the right time to start investing slowly to build a surprisingly large nest egg over the coming years.
