While the FTSE 100 may be the UK’s best-known stock market index, the FTSE 250 has a stronger track record. It has produced annualised total returns of over 12% in the last decade, while its big brother’s total returns are around 9% during the same time period.
Looking ahead, the mid-cap index could continue to post high returns. It appears to offer good value for money, as well as having significant exposure to international markets which may produce stronger growth than in the UK. As such, now could be the right time to buy a range of FTSE 250 shares in order to improve your chances of making a million in the long run.
Low valuation
While the FTSE 250 may have performed well in the last decade, enjoying a bull run alongside other major global indexes, it appears to offer good value for money. For example, it contains a number of companies in a wide range of sectors that offer strong growth prospects at a reasonable price.
Certainly, its price level has been more appealing in the past. But this has often been during periods of extreme stress on the wider economy. Given the encouraging growth prospects for the UK and the world economies despite the variety of risks they face, the index may contain a number of stocks that offer good value for money.
Buying such companies now could enable an investor to improve their risk/reward ratio and boost their chances of generating high returns.
Recovery potential
As mentioned, the UK and world economies currently face risks that include Brexit and a trade war, respectively. Clearly, it’s not possible to know how such events will ultimately play out. However, the FTSE 250 has a strong track record of recovering from bear markets and downturns in the past.
For example, it recovered from the dot com bubble and the financial crisis in the last two decades. Since those downturns, the index has posted record highs as it’s benefitted from improving economic conditions. While Brexit may prove to be a drag on its performance in the near term, the index is likely to follow its long-term trend to post higher highs over the long run.
International growth
With FTSE 250 members having exposure to a wide range of the world’s major economies, the index is geographically diverse. This could help to protect it to some degree in case of disruption in the near term from Brexit. It may also mean its members are able to capitalise on the growth potential that economies such as China offer over the long run.
As such, investing in a range of FTSE 250 shares could be a sound means to boost your portfolio returns. It could even lead to a £1m portfolio in the long run.