Investing £500, or any other amount, each month in a diverse range of FTSE 100 shares in an ISA could help to bring your retirement date a step closer.
Certainly, there are risks facing investors. They include political risks in the US and UK, as well as the prospect of a continued rise in coronavirus cases worldwide.
However, through buying financially-sound businesses that have the potential to enjoy improving operating conditions over the long run, you could build a surprisingly large retirement nest egg.
FTSE 100 growth opportunities
At the present time, it is difficult to assess which FTSE 100 sectors could offer the strongest growth opportunities over the long run. After all, coronavirus and the subsequent lockdown may have fundamentally changed a number of industries.
However, long-term growth trends may be intact for a number of industries. For example, an ageing world population means that demand for healthcare goods and services may rise. As such, investing in large-cap pharmaceutical, consumer healthcare and medical devices companies could prove to be a shrewd move. They may experience resilient (and high) growth rates in the coming years.
Similarly, online retailers could experience rising demand for their products as consumers continue to switch from in-store to web sales. Other FTSE 100 sectors such as banking, consumer goods and resources may also experience stronger trading conditions than investors are currently pricing-in. this may present good value buying opportunities, with many of those businesses trading below their long-term average valuations.
Financial strength
As well as buying FTSE 100 shares that offer strong long-term growth potential, purchasing businesses with sound finances could be a shrewd move in the present economic climate. They may be more likely to survive what could be a difficult period for the global economy. They may also have the potential to use low asset valuations to improve their market position through acquisitions.
Companies with low debt and access to significant amounts of liquidity may be lower-risk than their peers. This could put them in a position of strength in an uncertain economic period, and may allow them to command higher valuations as the world economy recovers.
Diversification
As ever, it is important to diversify when investing in FTSE 100 shares. Some companies and sectors may struggle to mount a sustained comeback after recent economic events. Therefore, reducing your reliance on them through owning a wide range of companies is a logical step for any investor to take.
Since the cost of sharedealing is now much lower than it ever has been, building a diverse portfolio of shares is an achievable goal for the vast majority of investors. It could improve your portfolio’s risk/reward ratio, and help you to build a surprisingly large nest egg that helps you to retire early.
