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Retirement saving: why I’d buy cheap FTSE 100 stocks to retire on

A swift rebound followed the FTSE 100’s recent market crash. But the index is still trading down around 25% year-to-date. As such, there still appears to be plenty of bargains in the index for investors focused on long-term retirement saving.

Retirement saving goals

Planning your retirement saving objectives can be a challenging process. But investors now have loads of options when it comes to finding cheap blue-chip stocks to buy for the long term.

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Indeed, after the recent market crash, many FTSE 100 stocks are trading on valuations that haven’t been seen since the global financial crisis over a decade ago. This could indicate that many of these investments offer a wide margin of safety.

Clearly, in the near term, there could be further pain ahead. This could impact your retirement saving goals. News regarding coronavirus is starting to improve, but the world is still exposed to a potential second wave of infections, and that could drive stock prices lower for a second time.

However, looking at the long-term track record of the FTSE 100, it seems highly likely the index can get over this new challenge.

Long-term performance 

The index has always recovered from its worst downturns and bear markets to experience periods of steady growth. Over 10-to-20-year periods, the FTSE 100’s return is almost always positive. As such, buying high-quality companies with strong balance sheets could help you meet your long-term retirement saving goals.

That being said, due to the uncertain near-term prospects for the FTSE 100, it may be best to buy a diverse range of companies that operate in many sectors and geographies. This will reduce the overall risk. At the same time, by diversifying your portfolio, it could increase your chances of taking part in any recovery.

One of the easiest ways to achieve this diversification is with a low-cost passive tracker fund. These funds buy the whole market, so you don’t have to worry about picking stocks yourself.

That’s one way to do it. Picking high-quality blue-chips with strong balance sheets is another strategy investors could use to boost their retirement saving prospects.

Savings plans 

Retirement saving plans could be the perfect way to take advantage of the recent stock market decline. Because the outlook for the market remains uncertain in the near term, investors need to take a long-term view when buying equities.

Most retirement savings plans require you to commit for several decades. That should remove the temptation to sell if the market takes another turn lower. It will also help you benefit from the recovery over the long term.

So, overall, while the recent market action might look scary, long-term investors should use the current downturn to buy a basket of cheap FTSE 100 stocks in a retirement saving plan.

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Rupert Hargreaves 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.