The FTSE 100 has a long track record of experiencing booms and busts. Therefore, while the recent stock market crash may have caused significant paper losses for investors, over the long run a recovery seems to be very likely.
As such, now could be the right time to invest £5,000, or any other amount, in a diverse range of blue-chip shares in a tax-efficient account such as an ISA.
Over time, stocks, such as the ones discussed below, could recover to produce impressive returns that improve your prospects of retiring early.
FTSE 100 housebuilder Berkeley Group
The last few months have been hugely challenging for many FTSE 100 stocks, including housebuilders such as Berkeley Group (LSE: BKG). Its operations have been disrupted due to lockdown measures. But it could be in a strong financial position to generate high returns over the long run.
For example, its most recent annual results stated it has a net cash position of over £1.1bn. This could be used to purchase undervalued sites that can deliver high returns on investment over the coming years.
With Berkeley having the potential to benefit from government policies, such as the stamp duty holiday alongside other FTSE 100 housebuilders, it could experience a return to growth over the coming months. This could be further boosted by continued low interest rates. And those may remain in place for a prolonged period of time due to the UK’s weak economic outlook.
Certainly, the stock faces an uncertain future. However, with a solid track record of recovery from previous housing market downturns, now could be the right time to buy a slice of it for the long term.
Another FTSE 100 stock that could improve your prospects of retiring early is BAE Systems (LSE: BA). The defence company recently announced that while coronavirus is having a negative impact on its performance, it has been able to improve its productivity. This could mitigate the impact of disrupted operating conditions. It could also act as a catalyst on its future growth prospects.
The company’s strong financial position may mean it’s in a good position to overcome the short-term risks faced across its sector. Recent acquisitions may also enhance its growth prospects, while its recent update suggested that demand for many of its products has continued to be high despite an uncertain economic outlook.
Although BAE’s decision to defer the decision on dividends may cause investor sentiment to remain weak over the short run, its track record of delivering relatively stable financial performance may lead to rising demand for its shares. After its 15% share price fall in 2020, it could offer a margin of safety that equates to attractive returns over the long run. As such, buying a slice of the FTSE 100 stock now could help to bring your retirement date a step closer.
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Peter Stephens owns shares of BAE Systems and Berkeley Group Holdings. 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.