Investing in FTSE 100 shares after the recent market crash may not yield a high return in the short run. The index could yet revert to a decline after its rebound. And investors may experience paper losses over the coming months.
However, in the long run, the FTSE 100 has the potential to deliver higher returns than other major asset classes. As such, now could be the right time to invest £5,000 in high-quality stocks.
With that in mind, here are two large-cap shares that appear to offer favourable risk/reward opportunities for the long term.
Investor uncertainty has contributed to a rise in the price of gold in recent months, with gold miners such as FTSE 100-listed Polymetal (LSE: POLY) enjoying improving financial outlooks. As a result, its shares have risen by 34% since the start of the year.
Despite their rise, Polymetal’s shares continue to offer good value for money. They trade on a price-to-earnings (P/E) ratio of around 12. And the company is forecast to post a rise in net profit of 7% in the next financial year. This could prove to be a relatively strong rate of growth compared to the wider FTSE 100, and it may just lead to improving investor sentiment towards the business.
Looking ahead, the gold price may face a volatile period. There are uncertainties regarding when the global economy will return to a sense of normality following the lockdown. And this could impact on investor sentiment.
However, Polymetal offers defensive characteristics due to gold’s appeal as a store of wealth. And the company has a dividend yield of around 5% too. So it could be a profitable FTSE 100 investment over the coming years.
FTSE 100 retailer Morrisons
FTSE 100 retailers such as Morrisons (LSE: MRW) have experienced a challenging period during the lockdown. The company recently reported a rise in its like-for-like sales of 5.7% in the first quarter of the year. But it is likely to record significantly higher costs for the current year. For example, recruiting additional staff to meet high demand could raise its operating expenses and limit its profit growth potential.
However, Morrisons seems to be well placed to capitalise on changing trends within the supermarket industry. It continues to invest in its online operations, which could prove to be increasingly popular among consumers over the coming years. It is also expanding its presence in the convenience store sector. This may diversify the business away from large-scale premises that have generally become less popular over recent years.
Although Morrisons’ share price could experience a challenging period if the economy’s performance disappoints, the FTSE 100 company’s sound strategy and solid financial position may mean that it offers improving total return potential. As such, it could boost your portfolio’s performance and help you to bring your retirement date a step closer.
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Peter Stephens owns shares of Morrisons. 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.