Now could be the perfect time to buy the FTSE 100!

As the world starts to emerge from the coronavirus crisis, the FTSE 100 could be the perfect way to play the global economic recovery.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Buying the FTSE 100 after the recent stock market crash may not seem like a sound financial move. After all, the economic prospects for the UK and the global economy are still pretty bleak. It could be years before the economy has recovered to its pre-crisis position.

However, buying the FTSE 100 today could prove to be a profitable move over the long run. Buying the index as a whole may increase your chances of benefiting from the economic recovery when it finally takes hold.

FTSE 100 recovery

As noted above, at this point it’s difficult to say when the global economy will recover from the coronavirus crisis. It could be months or years. It’s also quite challenging to pick companies that will emerge from the crisis in one piece.

Nevertheless, what we do know is that the FTSE 100 has weathered economic storms like this in the past. On every occasion, the index has suffered a significant decline, but it has recovered these losses over the next few months and years.

Therefore, the chances are that the FTSE 100 will recover from its decline in 2020 and 2021. But rather than trying to pick companies that might survive, the better option could be to buy the index as a whole.

Buying the index

Buying the FTSE 100 may allow you to benefit from the index’s recovery over the next few years while limiting risk.

The index offers exposure to 100 different companies in different sectors and industries. Moreover, two-thirds of the index’s profits are generated outside the UK. This means the index is well-diversified, and while some of its constituents might struggle over the next few years, the FTSE 100 may produce a positive return.

Buying the FTSE 100

It’s relatively easy for investors to buy the FTSE 100 today. Most online stock brokers offer access to low-cost passive tracker funds. These funds track the underlying index without any input from investors. All you need to do is click buy, sit back, and relax.

What’s more, the size of passive tracker funds means they tend to be relatively low cost. Some investment funds can charge more than 1% a year in fees. On the other hand, many passive tracker funds charge less than 0.1%. 

The impact of lower fees on your investment over the long term cannot be understated. For example, investors paying 1% in fund management fees over a decade would cost around £1,400 more in fees on an investment of £10k than investors paying just 0.1%. 

Long-term growth

So, while the prospects for FTSE 100 stocks may be uncertain at present, the global economy has always recovered from its challenging periods.

As such, buying a low-cost FTSE 100 tracker may be the best way to benefit from this recovery while minimising risk. Doing so could help you obtain a sizeable total return to improve your long-term financial prospects.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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.

More on Investing Articles

Smiling family of four enjoying breakfast at sunrise while camping
Investing Articles

How I’d turn my £12,000 of savings into passive income of £1,275 a month

This Fool is considering a strategy that he believes can help him achieve a stable passive income stream with a…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

2 top FTSE 250 investment trusts trading at attractive discounts!

This pair of discounted FTSE 250 trusts appear to be on sale right now. Here's why I'd scoop up their…

Read more »

Smiling young man sitting in cafe and checking messages, with his laptop in front of him.
Investing Articles

3 things that could push the Lloyds share price to 60p and beyond

The Lloyds share price has broken through 50p. Next step 60p? And then what? Here are some thoughts on what…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

£1,000 in Rolls-Royce shares a year ago would be worth this much now

Rolls-Royce shares have posted one of the best stock market gains of the past 12 months. But what might the…

Read more »

Investing Articles

Are HSBC shares a FTSE bargain? Here’s what the charts say!

There are plenty of dirt-cheap FTSE 100 banking stocks for investors to choose from today. Our writer Royston Wild believes…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on
Investing Articles

Just released: Share Advisor’s latest ‘Hold’ recommendation [PREMIUM PICKS]

In our Share Advisor newsletter service, we provide buy, sell, and hold guidance for our universe of recommendations.

Read more »

Investing Articles

Investing £5 a day could help me build a second income of £329 a month!

This Fool explains how £5 a day, or one less takeaway coffee, could help her build a monthly second income…

Read more »

Smart young brown businesswoman working from home on a laptop
Investing Articles

2 FTSE income stocks investors should consider buying in April

Income stocks are a great way to build wealth. Our writer details two picks she believes investors should consider snapping…

Read more »