The FTSE 100 may be trading close to a record high, but there are still opportunities to generate high returns in the long run. In fact, in future years the index could move even higher and help investors to boost their portfolio returns.
Even if the index does not surge in 2018, there are likely to be some industries and stocks that deliver high returns. That’s because there are always value and growth opportunities available for investors no matter how the wider index performs. And with a range of stocks and sectors to choose from, it could be argued that there is little need for investors to venture outside of the index when constructing their portfolios.
While the current bull market will not last in perpetuity, in the very long term the FTSE 100 is set to rise to even higher levels. The index started out at just 1,000 points in January 1984 and has experienced various peaks and troughs on its way to a record 7,550 points this year. For example, it experienced a sharp decline in the 1987 crash, while the dot.com bubble burst meant it slumped to a level of around 3,600 points. The financial crisis pushed it even lower, but it has been able to recover to reach an all-time high.
From its near-34-year track record, it’s clear that the index comes good in the long run. Therefore, even if an investor buys shares at the very top of a bull market, they can still generate a high return if they are able to hold on for the long run.
Of course, the FTSE 100 is made up of a range of different shares. At any point in time, some of them will be overvalued and others will be undervalued. This creates an opportunity for savvy investors to buy low and sell high. While the index may now be close to a record high, there are various defensive stocks that seem to be cheap and which trade on high dividend yields. While these type of shares will inevitably change depending on how investor sentiment appears, the reality is that the index will always have value opportunities on offer from which investors can profit.
Range of options
Since the FTSE 100 is a relatively large index made up of a variety of stocks in different sectors, it should be able to offer buying opportunities as economic trends change. For example, if technology companies become more important than they are at present to the UK and global economies, then this will be reflected in the make-up of the index. And if investors wish to buy stocks in a particular industry – such as defence due to an end of austerity and higher military spending – there are options on offer within the index to do so.
As such, there will always be options available to investors to profit from the success of the FTSE 100. That’s why it is worth utilising as a central part of Foolish portfolios for the long run.
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Peter Stephens has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.