If you are investing your first £2,000 or any other amount in the stock market today, buying a basket of FTSE 100 shares may be the best way to invest your hard-earned cash.
Some companies may be much better investments than others. The two companies highlighted below, for example, look set to prosper over the long term no matter what happens to the global economy.
FTSE 100 shares to buy
The UK’s largest retailer Tesco (LSE: TSCO), has spent the last five years recovering from an accounting crisis. However, it now looks as if the retailer has come to the end of this transformation.
The FTSE 100 stock reached its profit margin and efficiency goals last year. To celebrate, management hiked the company’s dividend for the year.
And now the company has recovered to a stable footing, its long-term outlook appears bright. As the largest food retailer in the country, Tesco is unlikely to suffer the same kind of customer exodus as experienced across the rest of the high street. If anything, sales should expand in line with population growth over the long term.
This may make the company a perfect first-time investment. Tesco is unlikely to yield the same sort of returns as other high-growth FTSE 100 shares. However, the retailer should produce steady and predictable total returns for investors over the long run.
A combination of dividend income and capital growth should help contribute to an elevated return. This year the stock is on track to yield 4%. That is around the same as the FTSE 100 market average.
Tesco is one of the most defensive FTSE 100 shares. Its peer Ocado (LSE: OCDO), on the other hand, is a high-flying tech stock.
Even though it also operates in the relatively steady and predictable grocery business, Ocado has made a name for itself in tech. Its tech division designs and supplies solutions for other retailers around the world.
While this business is still loss-making, investing heavily in technology is a core part of management’s growth strategy. The coronavirus crisis may even lead to increased demand for its products. Retailers want to protect their employees, and the best way to do this may be to automate part of the process.
Ocado is one of the few FTSE 100 shares that offer exposure to the fast-growing tech market. As such, it may be worth adding the blue-chip stock to your portfolio today. The business is forecast to make a loss this year, but analysts expect sales to grow by nearly 30% in 2020.
This kind of growth is exciting. Nevertheless, Ocado’s lack of profitability is concerning. That’s why it may be sensible to own the stock in a portfolio alongside more established FTSE 100 shares like Tesco. The combination of these two companies in a portfolio could provide investors with high total returns in the years ahead.
The post Investing your first £2K? I’d buy these 2 FTSE 100 shares today appeared first on The Motley Fool UK.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Tesco. 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 2020