I’d never buy any shares that I didn’t intend to hold for at least 10 years, and that also applies to top FTSE 100 stocks too. In the short run, how share prices will perform is anybody’s guess. Over the longer run however, the general trajectory is upwards.
The longer the investment term, the lower the risk from investing. That’s because my holdings have more time to recover from a stock market crash. A longer horizon term also allows me to buy undervalued companies, then hold on throughout the market cycle and wait for them to recover.
There are never guarantees when investing. Even the best investors in the world pick their share of duds. That’s why I’d invest in a broad spread of top FTSE 100 stocks, so if some underperform, others should more than compensate.
I’d buy and hold top FTSE 100 stocks
I find investing for the long term particularly comforting at times like these, when share prices are volatile and some are warning of a stock market crash. Nobody wants to invest in a stock, only for shares to crash next day. When that happens, even top FTSE 100 stocks will fall along with the weaker ones. However, with a long-term strategy, I should only suffer a paper loss. History shows that stock markets always recover, given time.
Some companies have adapted to the pandemic, others have been found out. Those with outdated strategies or weak balance sheets will take longer to recover, if they ever do. Right now, I’d look for top FTSE 100 stocks that have shown long-term resilience, as this should stand them in good stead for the uncertainties ahead.
Plenty of shares have performed strongly lately, including banking giants Barclays and Lloyds Banking Group, retailer Next, oil giants BP and Royal Dutch Shell, and housebuilder Barratt Developments. Anglo American, Rio Tinto, JD Sports Fashion and many others have also done well. Investors have piled into these top FTSE 100 stocks, believing they’ll lead the recovery once lockdown is over.
There are still plenty of undervalued opportunities out there. Household goods giant Unilever has underperformed. So has GlaxoSmithKline. Also Standard Life Aberdeen. These are the type of stocks I’d be looking to buy now. While they all face challenges, they remain top FTSE 100 stocks that should deliver attractive long-term share price growth and dividend income over the longer run.
A lot now depends on how the recovery goes. The UK’s vaccine rollout has been a success and let’s hope it sees off mutant Covid variations. There are dangers, as always. If global stimulus triggers inflation, this could slow growth. The US stock market is looking somewhat frothy. There will always be black swan events.
But by focusing my firepower on top FTSE 100 stocks and buying for the long term, I hope to shrug off these short-term worries.