The stock market crash may have dissuaded some Stocks and Shares ISA investors from buying FTSE 100 shares. After all, many of the index’s members are struggling to rebound from what was one of the fastest stock market declines in recent decades.
However, the low valuations and high yields on offer across the index could be appealing for long-term investors. Alongside the index’s recovery prospects, this could lead to high returns that improve your financial outlook.
Low FTSE 100 valuations after the stock market crash
Many FTSE 100 shares now trade on low valuations after the stock market crash. In some cases, high-quality businesses have market values that are significantly below their historic averages because of weak investor sentiment towards the wider stock market.
This could present buying opportunities for investors, since many companies may be trading at a price that is significantly below their intrinsic values. Over time, they are likely to command higher valuations as investor sentiment improves. Therefore, buying them now could be a means of improving your portfolio return prospects.
Of course, a quick rebound for FTSE 100 shares after the stock market crash seems unlikely. Stocks and Shares ISA investors may experience high volatility in the near future. However, those with a long-term view are likely to have sufficient time to benefit from a recovery.
Stocks and Shares ISA recovery
In terms of recovering after the stock market crash, the FTSE 100’s track record suggests that it is a matter of time before the index records a new all-time high. Even following its very worst periods, such as in the years after the 1987 crash and the global financial crisis, the index was able to deliver extremely strong growth on its way to new record highs.
Certainly, it may take many months or even years for it to once again trade close to 8,000 points. However, based on its track record, it seems likely that it will produce high-single-digit annual returns over the long run. Therefore, investors who buy now may benefit the most from its likely turnaround in the coming years.
Dividend investing opportunities
The stock market crash has also caused many FTSE 100 shares to offer high dividend yields. This could make them more attractive for income-seeking investors at a time when low interest rates look set to remain in place over the coming years. They may also be appealing to growth investors, since rising demand for dividend stocks could push their share prices higher at a faster pace than that of the wider index.
As such, there are a wide range of opportunities for Stocks and Shares ISA investors to generate high returns over the long run. Through building a diverse portfolio of FTSE 100 shares, you could improve your financial situation in the coming years.
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.