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Forget a Cash ISA! I’d aim to make £1m with bargain FTSE 100 stocks

While the FTSE 100 may have experienced a mixed year-to-date, it could offer a number of value investing opportunities for long-term investors.

Therefore, while many investors may naturally be swaying towards using a Cash ISA to avoid the potential risks which may be ahead from a global trade war, history suggests that now could be a good time to buy a range of high-quality shares.

In doing so, you may be able to generate significantly higher returns than a Cash ISA that help you to make a million, while also accessing a number of relatively defensive companies that have solid balance sheets.

Uncertain future

Buying FTSE 100 shares at the present time may seem to be a relatively risky move. After all, the index faces an uncertain period due to the recent escalation of the trade war between the US and China. Looking ahead, it would be unsurprising for the trade dispute to ramp-up in terms of its severity, which could put further pressure on the share prices of a range of FTSE 100 companies.

This, though, could present a buying opportunity for long-term investors. Large-cap shares are currently relatively cheap in many cases when compared to their historic levels, which may suggest that they offer wide margins of safety that could lead to higher returns for their investors over the long run.

Defensive appeal

While investing in shares is far riskier than having a Cash ISA, the size and scale of FTSE 100 stocks means that they may offer less risk than the wider stock market. For example, FTSE 100 companies generally operate across a wide range of countries, with them having a large client/customer base and solid balance sheets.

This could mean that while there is scope for their share prices to fall, they may prove to be less volatile than many investors realise. And, with the FTSE 100 having always recovered from recessions and bear markets, any future short-term pain may not last over the long run in terms of the index offering recovery potential.

Interest rate rises

Although the FTSE 100 may offer long-term growth potential for investors, Cash ISAs look set to deliver disappointing returns in the coming years. Interest rates are forecast to remain low over the next few years, with it likely to be some time before they return to normal levels of 4%-5%.

This could mean that Cash ISA returns continue to lag inflation, and that holders of Cash ISAs see their spending power decline in the long run. This is unlikely to prove to be a worthwhile means of making a million, which could increase the relative appeal of FTSE 100 shares over the coming years. As such, now may be the right time to take a long-term view on large-cap stocks, and buy FTSE 100 companies while they trade at discounts to their intrinsic values.

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Peter Stephens has no position in any of the 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.