Investing in FTSE 100 shares may seem to be a high-risk idea after the index’s recent crash. Certainly, there are risks facing the index that could cause its price level to decline dramatically in the short run. But, over the long term, it has recovery potential. And that could produce high annualised returns that are in-keeping with its past performance since inception in 1984.
As such, investors who have a long-term time horizon may benefit from the index’s relatively high returns. It could even produce a seven-figure portfolio for a regular monthly investment over a 30-year time period.
FTSE 100 growth potential
The FTSE 100’s performance in the short run could be volatile. Although the index has experienced a sharp recovery following its recent decline risks, such as trade tensions between the US and China and the prospect of a second wave of coronavirus, could halt its progress.
Therefore, it’s imperative to have a long-term time horizon when buying shares. For example, investors aged 40 are likely to have sufficient time for the index to recover from any short-term difficulties before they require a passive income from their retirement portfolio.
Investing regularly in shares could also be a sound move. Doing so through a tax-efficient account, such as a Stocks and Shares ISA, may further enhance your retirement prospects. Its low costs and lack of tax charged on dividends and gains could significantly boost your retirement nest egg. Certainly compared to investing through a bog-standard sharedealing account.
Making a million
Making a million from FTSE 100 shares by starting to invest at 40 may sound somewhat unlikely. However, the index’s 8% annualised returns could have a significant impact on regular investments over the long run.
For example, investing £750 per month for 30 years at an annualised return of 8% would produce a portfolio valued at over £1m. Of course, not every investor has £750 available each month to buy FTSE 100 shares. However, even more modest amounts invested regularly could produce a surprisingly large nest egg. Enough to deliver a passive income in excess of the State Pension by the time you retire.
Starting today
Opening a Stocks and Shares ISA can be completed online through a range of providers in just a matter of minutes. Moreover, setting up regular investments is a simple process. It costs as little as £1.50 per trade with a variety of sharedealing providers. This makes it accessible to almost all investors.
Therefore, with the FTSE 100 appearing to offer good value for money at the present time, now could be an opportune moment to start buying large-cap shares. Over time, they could really transform your retirement prospects and help you to retire with a larger nest egg. And that may even be valued in excess of £1m.