Owning FTSE 100 stocks has been challenging over the past few months. Indeed, some of these companies have lost nearly 75% of their market value year-to-date due to the coronavirus crisis.
However, other companies have performed exceptionally well. Insurance group Admiral, for example, is up nearly 38% over the past 12 months, including dividends. During this timeframe, the FTSE 100 has declined by 11%.
Other high-quality FTSE 100 stocks have produced similar positive returns. These returns show why owning a diversified basket of high-quality blue-chip stocks could help any investor get rich and retire early.
FTSE 100 stocks for the long haul
As noted above, the best FTSE 100 stocks to own over the long run are high-quality businesses. These companies are usually defined as having a strong competitive advantage, such as scale or a unique product or service.
High-quality companies also have strong balance sheets and large profit margins. These allow the businesses to return a large amount of capital to investors, or reinvest this money back into the operation to power growth.
Some examples of these kinds of operations include Admiral, as mentioned above, Bunzl, Unilever and Reckitt Benckiser.
All of these companies have strong balance sheets and offer unique products and services. These advantages have helped the FTSE 100 stocks outperform in the pandemic. A basket of these companies would have beaten the FTSE 100 by around 31% over the past 12 months.
A combination of income and capital growth has provided this return. All the companies mentioned have managed to maintain their dividends over the past 12-months. They’ve also been reinvesting shareholder funds to help improve growth in the years ahead.
These aren’t the only FTSE 100 stocks that exhibited these attractive investment qualities. A range of other businesses may also qualify for inclusion in a long-term buy-and-forget investment portfolio.
Get rich, retire early
Over the past three decades, the FTSE 100 has produced an average annual total return of around 8%. A basket of high-quality FTSE 100 stocks, such as those listed, have produced double-digit annual returns during the same time frame. Therefore, owning these quality businesses may help investors build a large fortune.
An investment of £250 a month into the FTSE 100 could grow to be worth as much as £500,000 in the space of 34 years. That’s assuming an average annual total return of 8%. However, if the same monthly amount was invested in a basket of high-quality FTSE 100 stocks, the returns could be significantly better.
Over 35 years, an investor could build a fortune worth £1.6m if the value of their nest egg grew at an annual rate of 12%.
These figures show why a basket of high-quality FTSE 100 stocks could help any investor grow their financial nest egg. By sticking with the market’s best businesses and investing for the long term, it may be possible to increase your chances of getting rich and retiring early.
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Rupert Hargreaves owns shares in Admiral Group and Unilever. The Motley Fool UK has recommended Admiral Group and Unilever. 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.