There are loads of FTSE 100 stocks I’d like to buy today, but I can’t buy everything I see. Long-term investing is all about choices.
I’m all in favour of diversification but I accept billionaire investor Warren Buffett’s argument that it’s also “protection against ignorance” and “makes little sense if you know what you’re doing”.
Buffett goes on to point out that “that a lot of great fortunes in the world have been made by owning a single wonderful business.” I wouldn’t go that far, but I can see the sense of aiming to build a £1m portfolio by selecting just 10 wonderful businesses. Here are mine.
I’m aiming for a million
I’m taking advantage of recent stock market volatility to load up on ultra-high yielding FTSE 100 dividend stocks.
I’ve bought wealth manager M&G, which yields 9.88%. I’ve also bought insurer and asset manager Legal & General Group, which yields 9.02%, trading at just 5.6 times earnings, and housebuilder Taylor Wimpey, which yields 8.52% and trade at a lowly 5.9 times earnings.
All three stocks have risks. M&G and L&G have fallen with stock market volatility, while Taylor Wimpey is at the mercy of our fragile housing market. Yet since I aim to hold all my picks for a minimum 10 years, and ideally longer, I can give them time to recover. I don’t expect to make a million overnight. It will take a seriously long time of patient portfolio building.
I’ll add two more dividend stocks to that list, Lloyds Banking Group, which is cheap and yields 5.98%, and mining stock Rio Tinto, also cheap and yielding 7.98%. Both require a full-blooded economic bounce to recover, and that could take time. While I wait, I’ll reinvest all my dividends to build up my stake.
Private equity manager 3i Group is my favourite growth stock on the FTSE 100. I’ve bought it twice over the summer. It’s smashed the index and trades at a premium valuation, but I still reckon its experienced management team can deliver long-term growth.
I’ve also taken a chance on two beaten-down FTSE 100 stocks, consumer goods giant Unilever and growth fund Scottish Mortgage Investment Trust, in the hope they bounce back from recent struggles.
I’m confident Unilever will get its act together but Scottish Mortgage is a high-risk, high-reward play. I had to include one.
Spirits giant Diageo has also slipped lately but I think it will recover as the cost-of-living crisis ebbs and drinkers have more cash in their pockets. The risk here is that eventually alcohol falls out of favour, like smoking. Could happen.
Finally, I’d invest in two technology stocks, information and analytics firm RELX and accounting software specialist Sage Group. Both have delivered solid growth over the years and I’m hoping that will continue. There’s only one problem. That takes me to 11 stocks. I can only pick one of these two, and I haven’t decided which yet. Well I said investing was about choices.
Having picked my stocks, I’d throw the kitchen sink at them. That means investing all I can afford, as soon as I can afford to do so, and reinvesting all my dividends. Making a million takes time. But I can’t afford to waste it.