So far in the year, we’ve seen many stocks crash and then slowly curve upwards. Such a decline and choppiness provide opportunities to buy stocks at a discount to what they were previously priced. And for those of us who want to retire early, that’s music to our ears.
Therefore today, I’ll discuss a FTSE 250 member I believe should be on your radar if you’re looking for robust investment ideas.
FTSE 250 may mean growth
The FTSE 250 index consists of the 101st to the 350th largest companies listed on the LSE. It was launched in 1992. Companies in it usually have a more domestic focus so they’re more directly affected by shorter-term developments in the UK economy. Thus, it’s a bit different than the FTSE 100 where most companies are multinational conglomerates.
My Motley Fool colleagues regularly point out that, over the long run, the stock market returns about 6-8% annually, on average.
For example, in the past 10 years, the FTSE 250 index is up about 75%. And this return holds true, despite the recent market crash. In January, the FTSE 250 went over the 22,000 mark and hit an all-time high. Now it’s hovering around 17,000.
This increases in the index level doesn’t include the dividend payments made out to shareholders. Average dividend yields for the FTSE 250 is about 2.8%.
You can retire wealthy
Let’s assume you’re now aged 25 with £5,000 in savings and that you plan to retire at 65. You decide to invest that sum in a fund now and make an additional £4,000 of contributions annually at the start of the year. You have 40 years to invest. The annual return is 6%, compounded once a year. At the end of 40 years, the total amount saved becomes £707,620.
Saving £4,000 a year would mean being able to put aside around £333 a month, or about £11 a day. Might you just be wondering if you should skip that next impulse purchase?
If you could increase your annual contributions to £5,000, then the total would be £871,667. Therefore, any amount invested in robust FTSE 250 shares will likely help you retire early. And possibly quite rich.
Making the right investment decisions in stock markets isn’t necessarily about constantly picking winning shares and funds, buying cheap, and selling fast when the price rises. Rather, it’s about having a long-term strategy. FTSE 250 member Playtech (LSE:PTEC) deserves your attention for such a portfolio.
Founded in 1999, it provides crucial software used in the gambling and financial trading industries. Put another way, it’s a technology company that works with other businesses. Its main customers include retail and online casino operators and government sponsored entities, such as lotteries. For example, in 2019, PTEC gained the seal of approval from online gaming giant GVC. Playtech will be providing services to GVC’s brands until 2025.
Its financials division, TradeTech Group, also works with the financial trading industry. Since March, the platform is benefitting from the increased market volatility and trading volumes. With an employee count of 6,000 across 21 countries, its international reach is also wide and growing. The emphasis is building the regulated market gaming business.
Year-to-date, PTCE shares are down 33%, hovering around 265p. With a forward P/E of 8.1 and P/B of 0.72, this FTSE stock is definitely on my radar. Finally, as it grows the customer base, Playtech could also become a takeover candidate.
tezcang 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.