£3k to invest? Here’s why I’d buy FTSE 100 shares in 2022

The FTSE 100 index includes top-performing shares. Harshil Patel looks at what will be driving the market in 2022 and beyond.

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The FTSE 100 index is among the best performing major global indices year-to-date. The top-performing stock in this large-cap index so far this year is energy giant BP, followed closely by another energy beast Shell. The BP share price has risen by 19% so far this year, and it follows a 36% gain in 2021. Both shares are being helped by rising oil prices. With energy prices showing no signs of slowing down just yet, there could be more room to grow for both of these FTSE 100 leaders.

Buy high, sell higher?

So why might I buy BP and Shell after their share prices have already moved higher this year? Well, there are several ways to make money from shares. I could try to buy low and sell high, or I could buy high and sell higher. It’s an interesting concept. I tend to use both techniques, albeit not at the same time of course.

More often though, I look at dividend shares and I consider both companies to fit the bill. They offer me a dividend yield of around 4%. Of course, their earnings growth needs to remain at least stable to support that level of dividend payment. But overall I feel they will both be able to achieve that.

Banking on the FTSE 100

Another reason why the FTSE 100 is performing relatively well among its global peers is due to the financial sector. There are several major banks listed on the Footsie. These include the likes of Barclays, and Lloyds. Share price gains for both in 2022 have so far followed market-leading returns last year. It’s no surprise then that the financial sector is amongst the top performing areas of the market year-to-date. As an example, the Barclays share price gained an eye-opening 30% last year and the positive momentum seems to have followed through into 2022. At the time of writing, it’s currently up another 10% this year.

So what’s going on and should I buy some banks shares now? Banks thrive on economic recovery. And since the removal of the most stringent lockdown restrictions in 2020 and then the arrival of a vaccines programme, the economy has attempted to recover and return to pre-pandemic activity. It seems to be working and the recent removal of further restrictions could drive the economy higher over the coming year. I reckon this could bode well for these British banks.

Beyond tech

As ever, there are no guarantees when it comes to economic predictions. Inflation has become a common buzzword recently, and rising inflation could be a cause for concern that threatens to derail an economic recovery. That’s because the Bank of England could decide to raise interest rates to prevent prices from rising too far.

Overall, I like to have a balanced spread of quality shares in my Stocks and Shares ISA. I own several technology shares and growth stocks. But despite a positive outlook for the individual businesses, I reckon it’s prudent that I also own shares that can thrive in different market environments. So if I was investing £3,000 today, I reckon FTSE 100 energy and banking giants could play a valuable part in my long-term diversified portfolio.

RISK WARNING: should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice. The Motley Fool believes in building wealth through long-term investing and so we do not promote or encourage high-risk activities including day trading, CFDs, spread betting, cryptocurrencies, and forex. Where we promote an affiliate partner’s brokerage products, these are focused on the trading of readily releasable securities.

Harshil Patel has no position in any of the shares mentioned. The Motley Fool UK has recommended Barclays and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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