I’d buy FTSE 100 shares today as the index dips below 7,000

As the pound crashes and interest-rate-rise expectations rocket, FTSE 100 shares have fallen below 7,000. They now look unmissable value to me.

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.

Happy young female stock-picker in a cafe

Image source: Getty Images

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.

FTSE 100 shares are down sharply today as chancellor Kwasi Kwarteng’s mini-budget speech continues to rattle global markets. The index has fallen 1.11% to 6,940, at time of writing. That’s the lowest level of the year. It is now down 7.53% in 2022.

Sterling is in freefall as traders expect base rates to hit 5.8% next year. That’s a huge increase on today’s 2.25%, which is already the highest for 14 years.

FTSE 100 shares are falling today

There are even reports that the Bank of England may have to announce an immediate base rate hike to stop the pound’s rout. That could be as much as 2%. Panic is setting in and FTSE 100 shares are not immune.

I’ll leave others to discuss the politics of Kwarteng’s controversial budget. My focus is on the FTSE 100 and only one thing matters to me right now. Shares listed on London’s index are cheaper than they were just a few days ago.

I am building a portfolio of FTSE 100 shares for retirement and my strategy is simple. I buy when they look relatively cheap and hold them for the long term. And when I say long-term, I mean decades.

I believe the longer I invest, the better my chances of generating serious wealth from the stock market. As we have seen this year, shares are highly volatile. In the short term, nobody has any idea where prices will go.

Yet in the longer run, the trajectory has been upwards. Better still, FTSE 100 shares pay generous dividends. By reinvesting them into my portfolio to buy more stock, I can make money even if the market goes nowhere for years.

When I wrote about the FTSE 100 last week, the index was yielding an impressive 3.93% a year. After today’s dip, that has increased to an even juicier 4.14%. So already I’m getting 0.21% more income as a result of today’s drop. 

Some individual stocks on the lead index have fallen fast this morning. The housebuilding sector is selling off as investors assume that higher interest rates will drive up mortgage costs will make property even less affordable.

Taylor Wimpey is down 7.03%, at time of writing, with Persimmon down 6.07% and Berkeley Group Holdings falling 5.34%. Yet I still think this is a good sector to invest in. Property shortages should limit the chances of a full-blown house price crash.

These stocks offer amazing yields

The housebuilding sector is a happy hunting ground for dividend income. Taylor Wimpey now yields 8.95% and trades at just 5.73 times earnings. Persimmon yields an incredible 18.53% and is valued at a dirt-cheap 5.43 times earnings.

There are plenty more bargain FTSE 100 shares out there, as the market sells off through no fault of its own. Naturally, buying stocks today could be risky. The index could easily fall further tomorrow. That is a chance I am willing to take.

I accept that I will never buy at the absolute bottom of the market. Today’s low valuation is good enough for me. If FTSE 100 shares do fall further, I’ll simply buy more at the lower price. Then hold them for decades.

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.

Harvey Jones doesn't hold any of the shares mentioned in this article. The Motley Fool UK has no position in any of the shares mentioned. 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

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »

Investing Articles

3 ideas to help investors aim for a million-pound Stocks & Shares ISA

The UK has a growing number of Stocks and Shares ISA millionaires, and this plan may be one of the…

Read more »

Illustration of flames over a black background
Investing Articles

2 red-hot UK growth stocks to consider buying in April

These two growth stocks are performing well, but can they continue to deliver for investors through 2024 and beyond?

Read more »

Charticle

Is JD Sports Fashion one of the FTSE 100’s best value stocks? Here’s what the charts say!

The JD Sports Fashion share price remains a wild ride during the first quarter. Could it be one of the…

Read more »