The performance of the FTSE 100 over recent weeks has been hugely disappointing. The lead index has experienced one of its fastest and most severe crashes of all time. It has moved as much as 35% lower than its 2020 starting price.
Despite ongoing uncertainty, now could be the right time to invest £10k in a range of FTSE 100 shares for the long run. They could offer superior returns than other popular assets, such as gold and buy-to-let properties.
FTSE 100 recovery potential
At the present time, many investors are turning to defensive assets, such as gold, in response to the FTSE 100’s decline. That’s understandable. The precious metal’s price has risen to a seven-year high in recent weeks. Investor demand for gold could continue to be high in the short run as a result of its status as a store of wealth.
However, in the long run, investor sentiment towards riskier assets is likely to improve. Following previous FTSE 100 bear markets, confidence has returned over the medium term. This could mean the prospects for profit via gold are more limited than those of undervalued FTSE 100 stocks over a long time horizon.
A FTSE 100 recovery may appear to be somewhat unlikely at the present time, due to the challenging outlook for the world economy. But the index’s track record shows it has always delivered successful turnarounds following its bear markets.
The same outcome is likely over the long run. So buying large-cap shares while they offer wide margins of safety could prove to be a shrewd move.
The speed at which the FTSE 100 has declined in 2020 may convince some investors that slower-moving assets, such as buy-to-let properties, are more attractive. However, in reality, house prices could also move lower.
They may take longer to reflect an uncertain economic outlook than is the case for the FTSE 100. But with affordability issues present across the industry, house prices may fail to deliver the same level of returns as they have done in prior years.
By contrast, many FTSE 100 shares appear to offer excellent value for money at the present time. Some FTSE 100 stocks have experienced falls of over 50% since the start of the year. Investor sentiment may remain weak. But, in many cases, those companies have strong balance sheets and wide economic moats. Both of thee could catalyse their performances over the coming years.
Therefore, now may be the right time to buy a diverse range of them. Clearly, further declines cannot be ruled out since, in the short run, news regarding coronavirus is likely to have a significant impact on investor sentiment. But, in the long run, they could offer impressive total returns relative to other assets such as gold and buy-to-let property.
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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.