Here’s how I’d invest £200 a month in FTSE 100 shares

Andrew Woods explains how setting aside a set amount each month and buying FTSE 100 shares could lead to long-term growth.

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Monthly investments can be extremely effective over the long term. This is due to the pound cost averaging that smooths out the purchase price over a period of time. If I had access to a spare £200 every month, here are two FTSE 100 shares I’d stock up on. Let’s take a closer look.

Only £200?

While £200 might not seem like a lot to invest every month, this equates to £2,400 a year. Over five years, that’s £12,000, not accounting for investment performance.

A seemingly small amount in the short term has the capability to grow manyfold over the long term. 

High oil prices

Lately, BP (LSE:BP) has been benefiting from high oil prices, caused mainly by the war in Ukraine.

This trend in the oil market led to sparkling results for the three months to 30 June. During that time, the oil giant decided to increase its quarterly dividend to ¢6 from ¢5.46, a gain of 10%.

What’s more, the business is embarking on a $3.5bn share buyback scheme. This is essentially a way for the firm to return profits to shareholders.

It’s possible however, that the prospect of recession may result in a falling oil price, because demand could fall dramatically. This may lead to a decline in the BP share price.

Despite this, the company paid a total dividend of $0.22 per share in 2021. At the current share price, this results in a dividend yield of 3.68%. While dividend policies can change, it’s good to know that I could secure income from this investment.

Rising interest rates

Next, Barclays (LSE:BARC) shares have become increasingly attractive as interest rates continue to rise. Rates are now at 2.25% in the UK, and this essentially means that banks can charge more for lending money.

Similar to BP, I find Barclays attractive as a monthly investment because of its potential dividend yield. 

In 2021, it paid a total dividend of 6p per share. Currently, this equates to a yield of 3.71%. Even with a small investment, I could derive a decent income stream over the long term with this level of yield.

However, there is a possibility that the cost-of-living crisis deters potential customers from taking on more debt. There may also be greater levels of bad debts, with customers unable to keep up with repayments.

On the other hand, the business has operating cash flow of £3.88bn. This leads me to believe it can navigate its way through any short-term difficulties it may come across.

Overall, if I were armed with £200 in spare cash each month, I wouldn’t hesitate to add both of these firms to my portfolio. While they may face challenges, they appear well-equipped and boast solid dividend yields. 

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.

Andrew Woods 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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