If I was a smarter man I would have been investing since I was old enough to hold down a paper round. Hindsight is always 20/20. But FTSE 100 investors are now facing the buying opportunity of a lifetime.
One investor’s stock market crash is another’s chance to buy bargains, and those chances don’t come around very often. Most investors have fled into low-yield bonds or cashed out entirely, and that’s where our chance to strike comes.
Choose FTSE 100 stocks you can hold for years and you’ll see the greatest benefit. I think a solid start would be Royal Dutch Shell, with its 11% yield and share price that is 42% cheaper than two months ago. Or Legal & General, with its growing revenues and profits. The FTSE 100 insurer’s price-to-earnings ratio – a measure of value – has dropped from 10.3 to 6.3 in just three weeks. It offers a 10% yield and its share price is 38.2% cheaper than it was in February.
Most high-yield companies offering plentiful dividends are now cheaper to buy than they have been at any point in the last 10 years. If you can screen out the noise and invest £5k or £10k in the best-quality companies you will get them at bargain prices.
What the richest do
It’s at times like this that I like to consult the greats. They are the ones who showed me the path to greater wealth and got me investing in the first place.
Bill Miller is an American investing giant and chief investment officer best known for his outstanding portfolio management of the Legg Mason Capital Management Value Trust.
Under his stewardship the trust consistently beat the S&P 500’s returns for 24 years in a row.
He said in a recent CNBC interview: “There have been four great buying opportunities in my adult lifetime. The first was in 1973 and 1974, the second was in 1982, the third was in 1987, and the fourth was in 2008 and 2009. And this is the fifth one.”
The FTSE 100 is now 35% down from where it was at the start of 2020. Despite the bear markets after the 1987 crash, the dotcom bubble and the financial crisis, the market it has always recovered and gone even higher.
Events take a turn
Most true value investing opportunities come around as a result of global macro events. They push down the share prices of big companies to a point where they are actually affordable for private investors like you and me. And there is a dual benefit for long-term buy and hold investors here.
As well as collecting massive dividend payments year over year, the 2020 stock market crash will provide you with capital share price improvements as the market stabilises in the years ahead.
A portfolio that returns 10% a year will double your money in just seven years. And with some share prices on the FTSE 100 now up to 50% cheaper than they were two months ago, that kind of return is now much more viable.
Looking ahead to 2027 might be tricky. But when it rolls around and your portfolio of good companies bought at knock-down prices is really singing, you’ll praise your past self for making good decisions.
In normal times, great profit only comes at great risk. But these are not normal times. FTSE 100 investors have an unprecedented opportunity right now. Don’t waste this chance.