Here at the Motley Fool, we’re great advocates of long-term investing in the stock market. And when markets crash our motto is simple: Keep calm and carry on investing. Many of the purchases you make at such times are highly likely to be among your most profitable investments over the long term.
However, investors do have different tolerances for risk. And market crashes can throw it into sharp relief. Are you currently looking to add some lower-risk FTSE stocks to your portfolio? Or are you a new investor wanting to get started without being overly ambitious? So which shares fit the bill?
National Grid (LSE: NG) is a blue-chip FTSE 100 stock. It has a near-monopoly position as the owner and operator of much of the UK’s gas and electricity infrastructure. As such, it’s a core holding in the portfolios of many investors.
The FTSE 100 has crashed 28% since world markets went into freefall. And some individual Footsie stocks have suffered much heavier drops. For example, cruise ship operator Carnival has seen its shares plummet 61%.
In this context, National Grid’s 19% decline is relatively benign. Nevertheless, it offers an opportunity for investors to buy into a lower-risk blue-chip at a discount price.
With the shares at 860p, and earnings per share (EPS) of 59.2p over the last 12 months, the price-to-earnings (P/E) ratio is 14.5. This is very reasonable for such a dependable blue-chip. Meanwhile, a running yield of 5.6% on a dividend of 47.83p is positively juicy.
Jersey Electricity (LSE: JEL) is a small company, with unique appeal as a lower-risk investment. It’s the sole supplier of electricity in Jersey. The States of Jersey (the government of the British Crown Dependency) owns 62% of the shares, and the other 38% has been publicly traded on the London stock market for over half a century.
I understand the company has a largely stable shareholder base of institutions and committed individual investors. I think this is a large part of the reason why its share price rarely swings dramatically. It’s dipped just 6% in the current market crash.
At 434p, with trailing EPS of 38.42p, the P/E is 11.3. The dividend of 15.7p is just-about-bomb-proof, being covered 2.4 times by EPS, and gives a running yield of 3.6%.
I named Capital Gearing Trust (LSE: CGT) as my pick in our Motley Fool ‘Top UK shares for 2020’ feature at the start of the year. Due to its long history of steady, lower-risk returns, I suggested CGT was “a top buy for whatever 2020 brings.”
The company’s objective is “to preserve shareholders’ real wealth and to achieve absolute total return over the medium-to-longer term.” Around 35% of its portfolio is currently in equities, principally selected index trackers. But it also has substantial holdings in lower-risk assets, such as index-linked and conventional government bonds.
Its share price has declined a modest 9% to 4,070p in the current market crash. It now trades at a slight discount to its net asset value, compared with its usual small premium. It’s not a stock for income seekers (it has a sub-1% yield), but its record of low-volatility, long-term capital growth is superb.
In summary, I’d be happy to buy all three of these lower-risk FTSE stocks in a balanced equity portfolio, or as part of a sleep-easy portfolio of assets with some equity exposure.
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G A Chester has no position in any of the shares mentioned. The Motley Fool UK has recommended Carnival. 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.