Is it too late to buy cheap FTSE 100 shares? I say NO!

Worried about missing the FTSE 100’s dips? Afraid you might buy at a high and see your investment fall? Here’s why that doesn’t bother me.

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FTSE 100 shares slumped during the coronavirus pandemic, but it’s too late to buy at those prices now. We had a fall this February too, especially in financial stocks. But they’ve already rebounded, and it’s again too late to buy that dip.

Doesn’t that always happen? Don’t we always miss the best time to buy and think “If only I’d bought back then?” But ask me if it’s too late to buy cheap FTSE 100 shares now. And should we wait for the next crash and hope to time it right? My answer is a resounding ‘no’!

A profitable decade

It’s never too late to buy cheap FTSE 100 shares. Let me tell you why I think so. The Footsie has gone nowhere much in five years. But look back 10 years, and the index was around 5,700 points. Today, at closer to 7,500, we’re looking at a 30% gain. Even if I’d invested at the highest point of 2012 and missed all the lows, I’d still be nicely in profit today.

The gains would actually be better than that. But before I explain, this 10-year thing is at the heart of The Motley Fool‘s approach to investing. It’s the long-term buy-and-hold strategy.

First, though, the FTSE 100 can lose me money, I need to remain aware of that. But the longer I invest, the more chance I have of coming out ahead. And for me, the risk is well worth taking — especially if I can minimise it by diversifying and by investing for decades.

A century’s research

Barclays has researched the past 120 years and found that UK shares have wiped the floor with other forms of investment. In that time, the UK stock market has never lost out to cash savings over any rolling 23-year period.

It doesn’t matter when a period started, or when it ended. Start at the high point one year, or end at the low point 23 years later, and we still get a winner. That doesn’t necessarily mean shares won’t ever lose out. But it does help me quantify the risk.

Someone who invested £100 in UK shares in 1945 and reinvested their dividends would have ended up with around £180,000.

And that’s the extra I have gained in the past decade. Dividends. On top of my 30% FTSE 100 price gains, I’ve added around the same again in dividends.

And if I reinvest my dividends in new shares (which I always do), I can enjoy fresh gains from those too. Oh, and the new shares will net me even more dividend cash the following year, which I can then invest in even more shares. Don’t you just love compound gains?

Timing the FTSE 100?

I want to get back to the idea of the best time to buy FTSE 100 shares. I recall the famous adage that is repeated all the time: Time in the market beats timing the market.

To summarise my investing approach:

  • Never try to time the market
  • Leave my money invested for decades

Warren Buffett, widely thought of as the best investor ever, never tries to time the market. That’s good enough for me. I reckon the best time to buy is now.

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.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays. 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.

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