The income return on most Cash ISAs currently lags inflation. This means that, over time, amounts held in them will be able to purchase fewer goods and services.
By contrast, investing in FTSE 100 shares has historically offered returns that are significantly higher than inflation. With the index currently offering a wide range of companies that trade on appealing valuations, its future growth prospects could be attractive.
As such, now could be the right time to buy these two large-cap shares. They may offer impressive capital growth in the coming years, and could help you to make a million.
The recent trading update from Next (LSE: NXT) highlighted the progress it is making despite uncertain trading conditions. For example, its full-price sales in the third quarter increased by 3.5%, which means it is on track to meet guidance of a 3.6% rise for the full year. It is also expected to deliver on its profit guidance for the full year, which shows that it has not been forced to invest heavily in price during what is a difficult period for the retail sector.
Clearly, the month ahead is a hugely important time for retailers such as Next. It is normally when a large proportion of its sales are made, and can have a significant impact on its overall performance and share price.
In the long run, the company’s offering could prove popular among consumers. It has a solid track record of delivering growth even in uncertain periods for the wider retail sector. With a price-to-earnings (P/E) ratio of 15, it seems to offer fair value for money given that its bottom line is forecast to rise over the next couple of years.
Another FTSE 100 share that could deliver capital growth in the long run is Smiths Group (LSE: SMIN). The diversified industrial company’s recent trading update showed that it is on track to meet guidance for the full year. It is on track to complete the separation of its medical business next year, which could produce a more focused company that can better deliver profit growth in the coming years.
Looking ahead to next year, Smiths Group is forecast to post a strong rate of earnings growth. It currently trades on a price-to-earnings growth (PEG) ratio of just 0.5, which suggests that it offers a wide margin of safety. This may enable it to merit a higher valuation over the long run that leads to capital growth for its investors.
The stock currently yields 3% from a dividend that is covered 2.2 times by net profit. This could lead to a rapidly-rising dividend that makes it a more appealing income opportunity. As such, now could be the right time to buy a slice of the business. It could provide strong total returns over the long term.
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.