The FTSE 100’s stock market crash has caused investor sentiment towards shares to weaken over recent months. The index may have regained some lost ground since its crash, but it continues to trade around 17% down year-to-date.
As such, it may now offer good value for money for investors who have a long-term outlook. The index’s recovery potential could make it a more attractive investment proposition than other popular assets such as Cash ISAs and buy-to-let property.
FTSE 100 bargain shares
The FTSE 100’s recent market crash could mean there are bargain shares available that may deliver strong recoveries over the coming years. Identifying them may be a challenging prospect due to the risks facing the world economy. For example, a second wave of coronavirus in the UK, or a continued rise in cases worldwide, could lead to difficult trading conditions for many businesses.
Therefore, investors may wish to purchase companies with solid finances and track records of producing rising bottom lines despite lower levels of demand. They may be better able to not only cope with difficult operating conditions, but could improve their market positions to benefit from a likely long-term recovery.
Since the FTSE 100 has always recovered from its bear markets to produce new record highs, buying bargain shares today could be a sound move. It could lead to above-average returns that make a significant positive impact on your financial prospects.
Some investors may feel that Cash ISAs are more attractive than FTSE 100 shares at the present time due to their lower risks. For example, £1,000 invested in a Cash ISA will not fall in value even if the world economic outlook deteriorates.
However, amounts invested in a Cash ISA may decline in real terms. In other words, when inflation is factored in, cash savings may be worth less in future than they are today due to low interest rates. This may lead to reduced spending power that means your financial position does not improve over the long run, since interest rates may be at low levels for a number of years as policymakers seek to support an economic recovery.
Low interest rates may help buy-to-let investors generate high returns. This could increase the appeal of properties compared to FTSE 100 shares.
However, UK house prices have been relatively overvalued in recent years versus average incomes. With factors such as rising unemployment and weak consumer confidence likely to weigh on their progress, investors may find it easier to obtain good value opportunities within the stock market. They may also find that void periods are extended as weak economic activity levels begin to impact on consumer incomes.
As such, bargain FTSE 100 shares could outperform buy-to-let properties in the long run. Following the market crash, now could be the right time to buy a diverse range of them to benefit from their likely recovery.
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.