FTSE 100 stocks have had a bit of a mediocre start to 2024, with the UK’s flagship index sliding 2% since the new year started. But after zooming out, the index appears to remain on an upward trajectory that began in October.
After dividends, investors have reaped a return of around 8%, so far. Yet, if economic conditions continue to improve, this might be just the tip of the iceberg. That’s why I’m keen to load up on discounted companies before valuations continue to climb.
Getting hold of more cash
A challenge that almost all investors face is finding the money to capitalise on discovered opportunities. There’s nothing quite as frustrating as finding a terrific stock to buy only to watch it surge before being able to invest due to a lack of capital.
Assembling a usable pile of money can be a challenge, depending on the circumstances. One of the best sources is a monthly paycheck. After all, this income is usually consistent and lends nicely to a pound cost-averaging strategy.
However, it’s also possible to find additional funds by making a few lifestyle sacrifices. Skipping a morning coffee or cancelling a rarely used subscription can add up in the long run. And even if it results in having just an extra £3 a day, when compounded over 30 years at an 8% return, that’s the equivalent of £135,995!
With this in mind, it may sound tempting to start exploring the use of margin. In oversimplified terms, this effectively allows an investor to borrow money to amplify any gains in the stock market. And providing an investment is successful, this can lead to some spectacular gains. Unfortunately, the opposite is also true and could result in massive losses that exceed the initial investment.
Considering the damage margin can cause, it’s not a risk worth taking, in my mind. Instead, investors should stick to finding sustainable sources of extra income either through salary increases or cutting expenses.
Is 2024 the start of the new bull market?
A technical bull market will be declared once a leading index increases in value by more than 20%. The FTSE 250 is only a few percentage points below this threshold. And the FTSE 100 seems to be on track to reach it later this year, based on analyst forecasts.
With that in mind, I’m cautiously optimistic that investors are set to reap some long-awaited recovery tailwinds this year. However, this is far from guaranteed. Inflation continues to pose a significant threat to many British households, especially in regard to food, transportation, and utilities.
While trends appear to be improving, any sudden decline in economic health could see consumer activity drop, delaying the recovery and sending shares firmly in the wrong direction.
Therefore, while I’m eager to capitalise on bargain FTSE 100 stocks, drip-feeding money instead of investing in giant lump sums continues to be the wiser strategy, in my mind. That way, should the worst come to pass, investors will still have money at hand to take advantage of the even lower prices.
