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The FTSE 100 gained’t be the very best place for each investor. No, everybody must base their selections on their very own wants and their very own analysis. But it surely’s the place I most need to put my cash in 2024, and past.
Over within the US, each the S&P 500 and Nasdaq hold hitting new all-time highs. In actual fact, the S&P 500’s up 23% to this point in 2024, whereas our pricey previous FTSE 100 has placed on simply 9%. And the Footsie nonetheless hasn’t matched the 52-week excessive of 8,474 factors it reached as way back as Could.
So the UK inventory market’s a loser then, and greatest averted? No, it’s nonetheless my favorite, for a couple of key causes.
However low, proper?
The principle cause is that I need to purchase shares after they’re low cost. Isn’t that what everybody desires? It would make economists completely satisfied when inventory markets are buzzing. But when we plan to maintain shopping for shares for the long run, we should always absolutely need costs and valuations to remain low.
My different key cause is that I am going principally for dividend shares, and the FTSE 100 has among the greatest yields I can discover. We’re taking a look at a forecast common dividend yield of three.7% this 12 months, together with all of the low ones, rising to 4% in 2025. That’s simply abnormal dividends, and doesn’t embody any specials.
And we even have what needs to be a long-term increase from the £50bn in share buybacks which were introduced to this point in 2024.
Lengthy-term favorite
For example, let’s have a look at considered one of my prime FTSE 100 shares, Aviva (LSE: AV.)
The five-year share value chart above, may not look nice. But it surely’s precisely what I would like, and I hope it stays unimpressive for at a couple of extra years but.
What it means is I can purchase extra Aviva shares on a ahead price-to-earnings (P/E) ratio of 12 this 12 months, with forecasts dropping as little as 9.2 by 2026 (based mostly on right this moment’s value).
And I may snag a fats 7% dividend yield, if these forecasts are correct. Oh, and the analysts suppose it should carry on rising within the subsequent few years too.
Dangers
The Aviva dividend, like every dividend, isn’t assured. The insurance coverage sector carries cyclical threat too, and right this moment’s upbeat outlook may change faster than we’d anticipate. Inflation and rate of interest uncertainty don’t assist.
Investing on this sector, as in any sector, means we have to perceive the companies we purchase. And that brings me to a different cause why I like FTSE 100 shares a lot.
I perceive the insurance coverage sector moderately effectively, particularly within the context of the UK market and economic system. And that should give me a bonus.
Backside line
So to sum up, investing in FTSE 100 shares places me in companies I perceive within the economic system that I do know greatest. And at occasions like these, it could possibly maximise my possibilities to purchase low cost, and hopefully lock in years of dividend revenue.
Oh, and there are different FTSE 100 sectors I additionally like and perceive, additionally at good valuations. So there’s loads of scope for diversification.
