With £1,000 to invest, I’d buy these 2 FTSE 100 shares

If I had only £1,000 to invest today, I’d invest £500 in each of these two FTSE 100 shares. While one stock is rather boring, the other is much riskier!

| More on:

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.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Although I’ve been investing for 35 years, I remember it was tough to save back in the 1980s. I had precious little money left over for investing, especially at university. Only in the 1990s did I start to invest in earnest, relying on the wisdom of Warren Buffett. Eventually, as my income and portfolio grew, I invested heavily in shares. But what if I started out again from scratch? What if I had only, say, £1,000 to risk today? Initially, I’d play safe by investing in shares in the blue-chip FTSE 100 index. For example, here are two FTSE 100 stocks that I don’t own, but would happily buy now. One share I consider to be almost boring, while the other is much racier and riskier.

1. ‘Boring’ FTSE 100 stock: Lloyds Banking Group

With over 30m customers and 65,000 employees, Lloyds Banking Group (LSE: LLOY) is one of the UK’s largest retail banks. It’s the #1 mortgage lender and a leading provider of credit to British businesses and individuals. Its major brands include Lloyds Bank, Halifax, Bank of Scotland, Birmingham Midshires, Scottish Widows, MBNA, and Black Horse. You’ll find a Lloyds outlet on most British high streets. On Thursday, the Lloyds share price closed at 53.75p, valuing this FTSE 100 firm at £38.2bn.

Why would I invest £500 of my theoretical £1,000 in Lloyds stock today? First, Lloyds is a FTSE 100 heavyweight with an easily understood business model. Second, Lloyds shares have done well over the past year, having recovered strongly from their 52-week low of 33.08p on 1 February 2021. Here’s how this stock has performed over five time periods: One week: +3.5% | One month: +7.7% | Six months: +13.6% | One year: +48.9% | Five years: -18.1%. As you can see, the stock has enjoyed positive momentum in 2021-22, but is down over five years.

Third, this FTSE 100 stock still looks cheap to me, even after recent price rises. Lloyds trades on a modest price-to-earnings ratio of 8.2 and a healthy earnings yield of 12.2%. The cash dividend yield of 2.3% a year is well below the FTSE 100’s 4%, but is rebounding after being cancelled in 2020. To me, these fundamentals look undemanding for a business poised to do well if the UK economy strengthened. But LLOY has been a long-term lemon to hold — and it could crumble again in another Covid-19 crisis.

2. Risky Footsie share: Polymetal International 

If Lloyds is boring, then my second FTSE 100 share is anything but. My risky, racy stock is Polymetal International (LSE: POLY). This is hardly a conventional business. It’s an Anglo-Russian miner of gold and silver, registered in Jersey and with headquarters in Cyprus. Talk about international roots, huh? What attracts me to Polymetal is that its shares have taken a beating recently. Here’s how its shares have performed over five time periods: One week: -3.9% | One month: -18% | Six months: -32.8% | One year: -34.3% | Five years: -6.1%.

After these sustained price falls, this FTSE 100 stock looks too cheap to me today. On Thursday, POLY closed at 1,051.89p, valuing the miner at almost £5bn. Its shares trade on a multiple of just 6.1 times earnings and a bumper earnings yield of 16.4%. The dividend yield of 9.2% a year is one of the fattest in the FTSE 100. However, mining stocks are notoriously volatile. Also, gold and silver prices may decline in 2022, as they did last year. Even so, I still see Polymetal as a buy for me today!

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Cliffdarcy has no position in any of the shares mentioned. The Motley Fool UK has recommended Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services, such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After falling 9% in 6 weeks, is this FTSE 100 stock now in bargain territory?

The BAE Systems share price hit a 52-week high on 3 June. Six weeks later, it’s down nearly 10%. Is…

Read more »

Smiling white woman holding iPhone with Airpods in ear
Investing Articles

I love the look of Entain shares, potentially 47% undervalued

Many FTSE 100 companies have been on a tear in 2024, but with Entain shares down nearly 50%, I think…

Read more »

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

Could Aviva shares reach £5.84 in the next 12 months?

Some analysts think Aviva shares could soar nearly 19% in the next year. This Fool takes a closer look to…

Read more »

Investing Articles

I’m looking at a once-in-a-decade chance to buy dirt-cheap FTSE dividend shares

Harvey Jones says FTSE 100 dividend shares have been showing signs of life lately but they're still cheap and there's…

Read more »

Arrow symbol glowing amid black arrow symbols on black background.
Investing Articles

If I’d put £10k in BAE Systems shares 10 years ago, here’s what I’d have now

BAE Systems shares have been on fire over the last decade. But just how much would a £10k investment back…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

My favourite S&P 500 stock is still potentially 52% undervalued

The S&P 500 is where many investors look for the next opportunity, but one of my favourites might just be…

Read more »

Smartly dressed middle-aged black gentleman working at his desk
Investing Articles

Here’s why I’m watching the Glencore share price

The mining sector has always been volatile, but with some recent strategic moves, I'm watching the Glencore share price even…

Read more »

Young black female footballer training on stadium pitch
Investing Articles

My JD Sports Fashion share price prediction for the second half of 2024

The JD Sports Fashion share price hasn't yet recovered from January’s slump. So will the retailer's stock bounce back in…

Read more »