I own a number of FTSE 100 shares. I see them as a smart way to build long-term wealth.
Footsie shares have been through a tough period in the last few years. But here are two reasons why I’ll continue to buy them.
They deliver
Firstly, they deliver solid returns in the long term.
Stock market volatility is something investors can’t avoid. Markets and companies will go through peaks and troughs. It’s inevitable.
But is there a way to mitigate against this? Well, there is. It’s to invest for the long run. The market has proven over time that the best way to benefit from it is to look at the bigger picture. By that, I mean to think in years and decades, not weeks and months.
The FTSE 100 plummeted 15% in 2020. In 2022, it only rose by around 2%. But since its inception, it has delivered 7% a year on average. That’s proof that patience pays off.
They look cheap
There’s another reason I’m keen to continue buying FTSE 100 stocks today. That’s because they look dirt cheap. Right now, the index trades on an average of 11 times earnings.
UK shares have come under a large amount of pressure in recent years. Brexit and the pandemic are just two events that have pushed prices down. But I’m not complaining. I think now is a chance for me to buy.
What I’m buying
With that, there are plenty of shares I have my eye on. One of them is Legal & General (LSE: LGEN).
Granted, the stock hasn’t put up the greatest performance in recent years. In the last 12 months, 5.4% has been shaved off its price.
But let’s zoom out. With every stock I buy, my aim is to hold it for 10 to 15 years. Ideally, it could be even longer.
So, while in the near term the stock hasn’t proved to be the most fruitful investment, if I’d purchased shares in 2010, today I’d be sitting on a 185.7% return. That said, I must note that past performance is by no means an indication of future performance.
But is Legal & General a smart buy today for the years to come? I’d say so.
It has suffered recently. Assets under management have dipped. People are less willing to invest due to inflationary pressures and a cost-of-living crisis. As such, the firm’s operating profit took a slight hit in the first half of the year compared to 2022. It’s also forecasted that its full-year results due 6 March will come in worse than originally expected.
But these are short-term issues. And in fact, I think the business stands in good stead to be a top performer in the years ahead. When interest rates fall, I’d expect deposits to pick up once again. There are also other factors to consider, such as an ageing population.
The stock looks cheap, trading on around six times earnings. To add to that, it provides the sixth-highest dividend yield on the FTSE 100 at 8.2%.
I’m sitting on a 9.3% gain with my investment in Legal & General so far. But at 240p, I plan to continue buying more shares in the coming days and weeks.
