2022 has been a challenging year for the UK economy. Many of the country’s largest firms are members of the FTSE 100. But despite a lacklustre business environment, FTSE 100 shares as a group are only down 1% since the start of the year.
The index stands 2% higher than it did at this point 12 months ago. That could mean it falls further if the economy worsens. However, I see now as a good time to add more FTSE 100 shares to my portfolio. Here are three reasons why.
I invest for the long term
My approach to investing is to focus on building my wealth over the long term by buying shares in companies I think have a business model that could help them do well for decades to come. Take JD Sports as an example. Investors have cooled on the company after management changes and the threat that a recession could hurt sales. In the past year, the JD Sports share price has tumbled 47%.
But in the long term I expect demand for sportswear to remain high. JD has a proven formula of delivering what customers want. It has grown dramatically over the past couple of decades. I do not expect that level of growth to continue now that the baseline is so large. But I see the company as having advantages I think could help boost sales, such as a large store estate and loyal customer base. It expects to match last year’s record sales again this year.
When I am upbeat about the long-term outlook for shares, a price fall can present a buying opportunity for my portfolio. I have been adding JD Sports shares to my portfolio in 2022.
FTSE 100 shares and endurance
Many FTSE 100 shares have been around for a long time. In some cases firms have a history of decades, while others like Legal & General can trace their lineage back much further.
Past success is no guarantee of what will happen next. However, I do think a company can benefit during a recession from having institutional memory and experience of previous difficult times.
That is why, with the economy performing weakly, I hope buying FTSE 100 shares could help me ride out uncertain economic storms. Many of the blue-chip companies in the index have been there before — and still survived to rank among the biggest UK firms today.
Better times ahead
I think it can be dangerous to try and time the market. Nobody knows for sure what will happen in future.
At some point the economy will turn, demand will grow and some FTSE 100 shares will surge. I have no idea when that will happen. It could take many years yet. But by the time it does, I may be too late to benefit fully from the turnaround. That turnaround could also surprise people by arriving suddenly.
Instead of trying to time the market, I am looking for value as usual. If I can find shares offering that right now, I would be happy to invest in them rather than trying to time the market, which I see as a fool’s errand.
The post 3 reasons I’d buy FTSE 100 shares before this year ends appeared first on The Motley Fool UK.
C Ruane has positions in JD Sports Fashion. 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 2022