It’s been a tough 10 years for FTSE 100 shares, as Brexit, the pandemic, the Ukraine war and resurgent inflation rocked the UK economy.
London’s blue-chip index did break through the 8,000 barrier on 16 February last year, but couldn’t sustain that heady high. It has dipped 2.82% on a 12-month basis to stand at 7,615.54 now. Luckily, since I buy individual shares rather than simply track the index, I’ve still made a solid return.
I took full advantage of the summer dip and went on a spree, after transferring three legacy company pensions into a self-invested personal pension (SIPP).
Good time to buy cheap stocks
Taylor Wimpey and 3i Group are my two biggest winners, both up 20%, while Legal & General Group and M&G are up around 15%. I’ve already started receiving dividends and there’s more to come: L&G and M&G yield 7.64% and 8.88%, respectively.
Inevitably, not every stock pick has been a winner. Mining giant Glencore is down 8% as China worries hit demand, while Smurfit Kappa Group (LSE: SKG) and Unilever have both slipped around 5%.
These are early days. I will judge their success over five to 10 years, and remain confident that all the shares could perform well. There are no guarantees, however.
All it takes is one profit warning or misfiring merger to knock a stock off track, as I’ve found with Smurfit Kappa. The paper and packaging specialist looked like a solid dividend growth stock, yielding around 4.5% and trading at just over seven times earnings when I bought it last June.
The shares plunged 10% in September after markets decided the board had overpaid to secure its £16bn hook-up with US rival WestRock. I took advantage of the dip to buy more of the stock. Now all I can do is sit and wait. The Smurfit Kappa share price is down 19.58% over 12 months. Let’s see where it goes when Smurfit publishes its full-year results on Wednesday (7 February).
I don’t expect an instant rebound as the company digests it acquisition, but I think its US manoeuvre will pay off over time.
Waiting for better times
A stock market slump like this one is a brilliant opportunity to go shopping for low-priced shares. Not only do I buy them at a cheaper price, but I get a higher dividend yield, too. With luck, they’ll bounce back at speed when the recovery comes.
I may have to be patient as we wait for the Bank of England to cut interest rates. Once it becomes clear that inflation is defeated, and borrowing costs start falling, I think the rally will really kick in. That would come as sweet relief after 10 years of struggle.
My retirement is roughly a decade away. For me, this is a real chance to make a dash for the finishing post, and I don’t want to miss it. That’s why I’m buying all the shares I can afford.
FTSE 100 shares trade at around nine times earnings, compared to 33 times in the US. I’m hoping they won’t be this cheap for much longer.
