The Motley Fool

How I’d invest £100k in this FTSE 100 stock market crash to make a million

Image source: Getty Images.

Investing £100k in FTSE 100 shares today may seem a risky way to try to make a million. After all, the stock market crash may not yet be over. High levels of volatility could lead to paper losses in the short run, which may be severe in some cases.

However, valuations across the FTSE 100 suggest that now could be the right time to buy stocks. Their recovery prospects and track records of enjoying bull markets after bear markets are proven. That may mean investing £100k, or any other amount, in high-quality businesses could increase your chances of generating a seven-figure portfolio in the long run.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

Fair valuations

The FTSE 100’s decline means that the index is trading at the same level as it did over 20 years ago. As such, many of its members are trading on valuations not seen since the last bear market in 2009. In some cases, FTSE 100 shares are even cheaper than they were back then.

However, the key focus for investors should be on paying a fair price for a business instead of a low price. In other words, the economic outlook over the coming months could be very challenging. Some stocks may not survive, or may need government help to do so. This means choosing stocks that have financial strength is key. Think low debt levels and solid free cash flow that can help them overcome short-term challenges.

Those companies that are more likely to survive the upcoming economic difficulties may not be the cheapest in the FTSE 100. But they could be the best value. Their current prices may reflect a risky outlook that they are ultimately likely to overcome. Focusing your capital on them may mean you get a relatively attractive risk/reward ratio compared to buying ultra-cheap-but-high-risk stocks.

Economic moats

One aspect of businesses that investors may wish to consider when purchasing stocks is their economic moats. For example, they may have a high degree of customer loyalty, unique products or lower costs than their peers. A wide economic moat may not necessarily protect a business from economic difficulties in the short run. But it may enable them to fully capitalise on the likely economic recovery in the coming years.

Governments and central banks are pumping billions into the economy, and potentially going further in this regard in the coming months. So many FTSE 100 stocks could offer recovery potential. After the financial crisis, many large-cap shares went on to post high returns. Among those businesses most likely to partake in a recovery could be those with competitive advantages. As such, they may be the most attractive investing opportunities at the present time.

Making a million

Clearly, investing £100k, or any other amount, in FTSE 100 shares today is unlikely to yield a high return in the short run due to the risks facing the economy.

However, the FTSE 100’s total returns since inception (around 8% per annum) mean that even if the index performs as it has done in the past, it would take around 30 years to make a million from a £100k investment. Through buying high-quality businesses with wide economic moats at fair prices, though, you could reduce the amount of time it takes to make a million.

“This Stock Could Be Like Buying Amazon in 1997”

I'm sure you'll agree that's quite the statement from Motley Fool Co-Founder Tom Gardner.

But since our US analyst team first recommended shares in this unique tech stock back in 2016, the value has soared.

What's more, we firmly believe there's still plenty of upside in its future. In fact, even throughout the current coronavirus crisis, its performance has been beating Wall St expectations.

And right now, we're giving you a chance to discover exactly what has got our analysts all fired up about this niche industry phenomenon, in our FREE special report, A Top US Share From The Motley Fool.

Click here to claim your copy now — and we’ll tell you the name of this Top US Share… free of charge!

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.

Our 6 'Best Buys Now' Shares

The renowned analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply enter your email address below to discover how you can take advantage of this.

I would like to receive emails from you about product information and offers from The Fool and its business partners. Each of these emails will provide a link to unsubscribe from future emails. More information about how The Fool collects, stores, and handles personal data is available in its Privacy Statement.