If you are happy to invest for the long haul, periods of economic uncertainty can throw up some decent investing opportunities. And the run-up to Brexit has provided heaps of uncertainty here in the UK.
With that idea in mind, here are two FTSE 100 investments I’d consider for my retirement portfolio right now.
Fast-moving consumer goods
The first is fast-moving consumer goods champion Reckitt Benckiser Group (LSE: RB), which is well off the highs the stock achieved during 2017. Right now, with the share price near 6,580p, the forward-looking earnings multiple for 2020 stands close to 18 and the anticipated dividend yield is around 2.8%.
The share price might have eased back, but operating cash flow has continued growing and the dividend has expanded by about 26% over the past five years. This looks to me like one of those situations where operations progress against a falling share price to produce better value. But when should we buy? I’d be happy to add the stock to my retirement portfolio right now because although the valuation looks quite full, quality enterprises like this rarely sell cheap.
As long as the company doesn’t lose any of the shine from its quality credentials, why should the valuation go much lower? If the valuation is maintained, the shares could rise to reflect operational and strategic progress from where we are now.
In early May, the company delivered a mildly positive outlook statement and a new chief executive is warming his seat up this month. I see change at the top of any organisation as potentially positive, so rate that as another reason for me to buy some of the shares.
The index itself
I’ve been bullish on the long-term prospects for the FTSE 100 index for some time. My guess is that over a time period measured in decades, index investors could do very well indeed, especially if they compound their gains by reinvesting dividends along the way.
In fact, one rule that an individual share has to pass before I buy it is that I must believe the likely total returns will outpace those from simple index tracking. That is the case with Reckitt Benckiser.
But there is a definite place in my retirement portfolio for a FTSE 100 index-tracking vehicle, and exchange-traded funds (ETFs) provide a neat way of achieving that. It pays to shop around, but as an example, one of the cheapest FTSE 100 tracker ETFs is the iShares FTSE 100 UCITS ETF (LSE: ISF) with ongoing charges around 0.07%. On top of that, you could incur some holding charges from your SIPP or Stocks and Shares ISA provider.
But if you want the freedom to buy and sell your FTSE 100 investment just like any other share, ETFs are useful. You can also harvest dividends for manual reinvestment as you can with other shares, or for automatic reinvestment via an arrangement with your share account provider if it offers the service.
- Have £2,000 to invest in the FTSE 100? Here are 2 dividend shares I'd buy in an ISA today
- 3 simple steps to get rich, retire early and beat the State Pension
- Forget 1% from a Cash ISA. I’d pick up 25% risk-free from this ISA
- Forget buy-to-let: I think FTSE 100 property shares can help you make a million
- Forget Bitcoin! I'd make a million using this strategy
- Top shares for 2019
Kevin Godbold has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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.
Motley Fool UK 2019