If you’re looking to retire early, the best asset you could buy today may be FTSE 100 stocks. The UK’s leading blue-chip stock index is made up of some of the world’s best companies.
While the near-term outlook for these businesses might not be too good, over the long term, they’re likely to produce high total returns for investors.
As such, now may be the perfect time to snap up a basket of these FTSE 100 stocks while they’re trading at depressed valuations.
FTSE 100 stocks on offer
The FTSE 100 contains some of the biggest businesses in the world. However, some of these stocks could be much better investments than others. For example, companies such as BP may face massive challenges in the years ahead as the world moves away from dirty fossil fuels towards renewable energy.
These companies may not be good investments in the long term. Nonetheless, there are plenty of other FTSE 100 stocks that might be a better addition to your portfolio. Companies such as Reckitt Benckiser, which is one of the world’s largest producers of disinfectant, among other things. Demand for this product is unlikely to shrink over the long term and should only grow in line with the world’s population.
FTSE 100 banks such as Barclays, should also be able to produce positive total returns for investors over the long run. Bank earnings tend to grow in line with economic growth, which suggests that while the sector may face significant headwinds in the short term, these lenders should be a good investment over the long run.
Buy and hold
Many FTSE 100 companies have bright prospects over the long run, but they are likely to face further headwinds in the short term. Unfortunately, it is impossible to say when the global economy will recover from the coronavirus crisis. Therefore, investors and companies may face further uncertainty in the weeks and months ahead.
Still, over the past few decades, the FTSE 100 has weathered many dips. In fact, over the past three decades, the index has fallen 50% or more on two occasions. However, after every severe decline, the market has staged a healthy recovery. That suggests the same could happen this time around as well.
Therefore, now could be the perfect time to buy a basket of high-quality stocks with bright outlooks. While the market has staged a modest recovery from its March low over the past few months, many of these companies are still trading at a discount to the level at which they started the year.
That suggests they could offer a margin of safety for long-term investors who are willing to buy today and hold through further uncertainty. Considering the performance of FTSE 100 stocks over the past few decades, following such a strategy could substantially improve many investors’ retirement prospects.
The post Why I’d buy FTSE 100 stocks to get rich and retire early appeared first on The Motley Fool UK.
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Rupert Hargreaves owns no share mentioned. The Motley Fool UK has recommended Barclays. 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