Picture supply: Getty Pictures
It has been a banner 12 months for Britain’s index of main blue-chip corporations, the FTSE 100.
Throughout at this time’s (6 October) market session, the index hit a brand new all-time excessive. It has accomplished that repeatedly this 12 months. The truth is, the typically staid-seeming FTSE 100 now stands 58% larger than 5 years in the past.
What may occur from right here – and the way can I try to use it to my benefit as a small non-public investor?
Market predictions might be tempting – however harmful
The truth is, no person is aware of what’s going to occur from right here for positive. We will solely speculate at finest.
An all-time excessive whereas the financial system appears more and more fragile could appear incongruous. Taken along with wider geopolitical dangers and indicators of an AI bubble within the US inventory market, it has led some traders to worry the prospect of a inventory market crash.
Alternatively, whereas the US market has been racing forward, the London market appears much less expensively priced.
The value-to-earnings ratio of the FTSE 100 is nicely under its US equal. Possibly the upwards momentum can proceed!
Attempting to find long-term worth
So, relatively than spending numerous time making an attempt to time the market – one thing I see as finally pointless – I’m as an alternative getting again to brass tacks.
My strategy to investing is looking for nice companies which have enticing share costs.
If I spend money on a diversified mixture of such companies, I hope that over time I can goal to construct wealth because of a mix of dividends and share value development. That, at the least, is the aspiration!
In apply, dividends should not assured. Whereas the FTSE 100 has been on hearth these days, it’s all the time value remembering that share costs can fall in addition to rise.
That’s typically the case even when an organization is doing nicely. Its share value could possibly be affected by wider damaging market sentiment, for instance, or it could be that an organization’s share was merely overpriced earlier than.
However taking a long-term strategy to investing helps, for my part. I consider that, over the long term, nice companies must create substantial worth – and hopefully that will likely be mirrored of their share value.
Crushed down, however with promising indicators
For example of such an strategy, for some time I owned FTSE 100 vogue home Burberry (LSE: BRBY). Final 12 months, its share value fell a good distance – and got here again a good distance too. This 12 months, it did the identical.
What has been happening?
With luxurious items markets wrestling with weak demand in lots of areas, Burberry’s economics started to look much less enticing. Weak gross sales efficiency didn’t reassure the Metropolis and the corporate’s administration modified final 12 months.
However over the long run, I see so much to love. The corporate has a novel model that has confirmed its enchantment to many shoppers repeatedly. It has a confirmed enterprise mannequin and, whereas the high-end rag commerce might be cyclical, ultimately demand often bounces again as soon as the financial system does nicely sufficient.
Burberry shares – up 91% since April — soared after I purchased them. I made a decision to take that revenue off the desk and hunt for different FTSE 100 shares I assumed could possibly be long-term bargains. If the Burberry share value falls down once more, although, it’s on my procuring record.
