The FTSE 100 crash seems to be all but over. The index has stayed above 6,000 during the last six sessions. With lockdowns being lifted around the world, optimism about business and the economy is also rising. This can give an even bigger fillip to stock markets. But it also creates an investor dilemma if you have £10,000 to invest.
I am keen to invest right now, but I am not sure whether the FTSE 100 index might fall again (or how fast it might continue to rise). The fact is, the economy is still weak. It is possible that there’s more bad news in store that will result in another stock market crash.
I think the best way forward now is to invest in shares of dependable companies. If we do that, then we don’t have to worry about what happens to their share prices in the next few months. And of course, stock markets may be so robust that if I have £10,000 to invest now, it could double in a shorter than expected period. But even if shares do not remain strong, and their investment value dips, I am assured that over time I would still come out ahead.
Look to the past
One way to see how dependable a stock might be is to look at its past history. There are several FTSE 100 companies that have been around since longer than the Great Depression. In other words, they have proven time and again that they cannot just survive the bad times but thrive at other times. Two examples are the tobacco biggie Imperial Brands and consumer goods giant Unilever.
Long-term potential
If history is one way of assessing a company, considering its future prospects is another. Tobacco companies, for instance, could see a shrinking in markets over the next decades. So if my investing horizon is that long, I would take this macro-factor into account before buying this and other such stocks. In line with this, online marketplaces like Ocado for groceries and Rightmove for real estate are the companies for the future.
£10,000 to invest in financially healthy companies
Having considered both the past and the future, I think it is also most important to consider where the company is right now if I have £10,000 to invest. I like financially healthy companies with growing revenues and, preferably, rising profits too. Low debt is another positive, though it is not my biggest concern when buying shares of otherwise healthy companies.
One I bought recently is British luxury fashion label and retailer Burberry, which is also in fact my top share for June. It ticks boxes for an established past, future potential and healthy present. It is suffering right now, because of the lockdowns and the fact that consumer spending is always curbed during recessions. But I think with its growing Chinese market, its future holds promise.
There are plenty of other FTSE 100 stocks in which I can invest £10,000 right away that can offer big returns in the future. I just need to pick them carefully.