Forget a Cash ISA: I’d buy these 2 FTSE 100 stocks today instead

These two FTSE 100 (INDEXFTSE:UKX) shares seem to offer higher return prospects than a Cash ISA.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

While interest rate rises are forecast over the coming years, the speed at which they increase is expected to be rather pedestrian. As such, savers may experience negative real-terms returns from having Cash ISAs.

This could make the prospects for the FTSE 100 even more appealing. The index also appears to offer good value for money at the present time, with a number of large-cap stocks having growth potential and attractive valuations.

Therefore, now could be the right time to focus on these two FTSE 100 stocks. They may have experienced a turbulent summer in terms of their capital returns, but in the long run, their risk/reward ratios appear to be enticing.

RBS

The latest results from RBS (LSE: RBS) showed that economic uncertainty is weighing on its financial performance. It is, therefore, unlikely to meet its cost:income ratio and return on tangible equity targets for 2020.

While disappointing, the bank is expected to deliver on its targets over the medium term, with its recent interim results highlighting the cost savings that are currently being delivered. And, while the cost of PPI claims could prove to be higher in the short run than previously expected due to a surge in claims as the August 2019 deadline approached, the long-term prospects for the bank could be more positive than its valuation suggests.

In fact, RBS currently trades on a price-to-earnings (P/E) ratio of just 7.5. Alongside a forward dividend yield of 6% that includes special dividends, its income and capital return potential over the long run could be relatively high.

Certainly, continued economic uncertainty may weigh on its financial performance in the near term. But, with the UK economy forecast to grow by 1.4% in the current year and 1.3% next year, the bank’s financial prospects may be more encouraging than its share price suggests.

Rightmove

Having fallen by around 7% in the last three months, online property listings business Rightmove (LSE: RMV) could experience a period of uncertainty. Although house price growth does not directly impact on its financial performance, a slowdown in the property market could cause investor sentiment to decline to some degree over the coming months.

This, though, could present a buying opportunity for long-term investors. Rightmove has a dominant position in what remains a lucrative market that is expected to become increasingly popular as digital channels gradually become a more dominant part of the wider estate agency industry.

Since the stock is forecast to post a 13% rise in its bottom line in the current year, its outlook is relatively positive. It has recorded double-digit earnings growth in every one of the last five years, which suggests it has a solid strategy and a degree of consistency in what is an uncertain wider housing industry. As such, now could be the right time to buy it following its recent share price pullback.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens owns shares of Royal Bank of Scotland Group. The Motley Fool UK has recommended Rightmove. 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.

More on Investing Articles

Ice cube tray filled with ice cubes and three loose ice cubes against dark wood.
Investing Articles

Just released: our 3 top income-focused stocks to buy before April [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Investing Articles

Is this the best chance to buy cheap FTSE 100 shares in a generation?

I want to buy shares when they're cheap, and sell... never, just keep taking the dividends. And the FTSE 100…

Read more »

Man putting his card into an ATM machine while his son sits in a stroller beside him.
Investing Articles

Could NatWest shares be 2024’s number one buy for passive income?

For those of us looking to earn some long-term passive income, how does NatWest's 7% dividend yield sound? It sounds…

Read more »

Investing Articles

£12K in savings? Here’s how I could turn that into £13K annual passive income

This Fool explains how investing a lump sum can help her build a passive income stream to enjoy in her…

Read more »

Aerial shot showing an aircraft shadow flying over an idyllic beach
Investing Articles

Here’s why Rolls-Royce shares are now set to fly over the £4 mark

Once again, Rolls-Royce shares are crushing the FTSE 100. Should I add to my holding of this stock at the…

Read more »

Investing Articles

1 under the radar FTSE 100 AI stock investors should consider buying

Our writer explains why this FTSE 100 pick could be a shrewd investment with its established experience of using AI…

Read more »

Investing Articles

Does the beaten-down Diageo share price make it a no-brainer buy?

Harvey Jones spent years waiting for the Diageo share price to look like good value, before finally buying it in…

Read more »

One English pound placed on a graph to represent an economic down turn
Investing Articles

8%+ yields! Should I buy these FTSE 100 income shares this month?

Christopher Ruane weighs some pros and cons of two FTSE 100 shares, both of which have a dividend yield over…

Read more »