If I didn’t have any savings beyond a bit of cash in the bank, I’d start trawling the FTSE 100 for top blue-chip stocks.
Investing directly in equities isn’t for everybody. But for those who understand the risks – and crucially the rewards – it’s a terrific way of building long-term wealth from dividend income and share price growth. I wish I’d started at 25. I think I’d be a lot richer.
Here I’m picking out one growth stock, one income stock, and one that offers a bit of both. I’d start by investing £1k in each, then building my stake over time.
A spread of stocks
For growth, I’d buy the Scottish Mortgage Investment Trust (LSE: SMT). It invests in “the world’s most exceptional growth companies”, which means outside tech exposure. Just over half the fund is invested in the US.
The biggest single holding is chipmaker Nvidia. Amazon, SpaceX, Tesla, Ferrari, and Northvolt also feature prominently. Just over a quarter of the fund is invested in private, unquoted companies.
In the short run, Scottish Mortgage can be bumpy. When tech stocks crashed in 2022, it fell by half. It’s on the mend now — the shares have climbed 31.52% over the last 12 months.
It remains risky. Nvidia cannot keep growing forever. Tesla faces serious challenges. That’s why I’d buy with a long-term view, aiming to hold for decades. Over time, it should really put my £1k to work.
I’m partial to high-yielding income stocks and the FTSE 100 is full of them right now. Insurer Aviva (LSE: AV) offers a blockbuster yield of 6.96%. That’s notably higher than the FTSE 100 average of 3.7%.
Growth and income
Dividends aren’t guaranteed, though. Aviva paused payments during the pandemic and then restarted them at a lower rate. Happily, the dividend per share has increased steadily since. Let’s see what the chart says.
Chart by TradingView
Aviva has also delivered share price growth lately, rising 19.75% in the last 12 months. Yet it doesn’t look too expensive to me, valued at 12.58 times earnings. It’s nother stock to consider buying and holding with a long-term view.
I’d complement them with FTSE 100 defence manufacturer BAE Systems (LSE: BA.). With Russia and China menacing, the West is being forced to rearm. BAE has a massive order book, and unless peace breaks out soon, it’s likely to grow.
My main concern is that the BAE Systems share price has done so well lately, it’s due a breather. It’s up 38.89% over one year and 173.37% over five. Today, it looks a little expensive trading at 21.28 times earnings.
I put off buying it for years for that reason, only to surrender and buy it in March. I wish I’d acted much earlier. The 2.2% yield may seem low, but BAE has a great track record of dividend hikes. Let’s see what the chart says.
Chart by TradingView
I think these three FTSE 100 shares would lay the groundwork of a successful portfolio. But it’s only the start. There are plenty more opportunities out there.
