Is Now The Right Time To Buy The FTSE 100?

Should you buy a FTSE 100 (INDEXFTSE:UKX) index tracker?

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

On 30 December 1999, with the millennial celebrations reaching their height and the stock market in the raging tech bull market that marked the end of the last century, the FTSE 100 nearly touched 7000 points (it closed on 6930 that day).

Fast forward to today, and the FTSE 100 stands at 6654. After so many years of peaks and troughs — through the tech crunch, the credit crunch and the Eurozone crisis — the stock market has never breached the highs of 1999.

FTSE 100 trackers have just been treading water

If you had bought a FTSE 100 tracker at the turn of the century, your investment would have made no money at all.

If you had saved your money in a run-of-the-mill bank or building society savings account, even with the record low interest rates we have had since the financial crisis, you would have beaten the return of a tracker.

So clearly a FTSE 100 tracker is a terrible investment, right? There seems to be no clear reason why anyone would buy a tracker, when the returns are so woeful, and you are as likely to lose money as make money.

Have you spotted the mistake I’m making?

This is a classic piece of penultimate thinking: thinking that what has happened during the past few years will be what happens in the future. In actual fact, you need to see this trend in the context of the bigger picture, and of stock market patterns over many decades. Older and wiser heads will know that if you have seen this trend over so many years, the opposite is likely to happen in the future.

Now is the time to buy!

It’s no surprise that one particularly old and wise head, Warren Buffett, has just advised his wife to put her retirement fund in an index tracker. Coincidentally, I’ve started investing some of my wife’s savings. The next chunk of money she gives me I plan to invest in a FTSE 100 tracker. I plan to invest some of my cash in a tracker, too.

From my point of view this is the perfect time — if you are a long-term investor, and especially if you’re not particularly bothered about P/E ratios, dividend yields and the like — to invest in a FTSE 100 tracker. The main reason is because I think the FTSE 100 will be rising in future years, rather than treading water.

And if you’ve made up your mind to buy a FTSE 100 tracker, which would you pick? Well, there are now many FTSE 100 trackers with low, low charges. Among the cheapest are the Vanguard FTSE 100 ETF (LSE: VUKE), the HSBC FTSE 100 Index, and the Legal & General UK 100.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Prabhat Sakya has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

After it crashed 25%, should I buy this former stock market darling in my Stocks and Shares ISA?

Harvey Jones has a big hole in his Stocks and Shares ISA that he is keen to fill. Should he…

Read more »

happy senior couple using a laptop in their living room to look at their financial budgets
Investing Articles

How’s the dividend forecast looking for Legal & General shares in 2025 and beyond?

As a shareholder, I like to keep track of the potential dividend returns I could make from my Legal &…

Read more »

artificial intelligence investing algorithms
Investing Articles

Could buying this stock with a $7bn market cap be like investing in Nvidia in 2010?

Where might the next Nvidia-type stock be lurking in today's market? Our writer takes a look at one candidate with…

Read more »

Investing Articles

Is GSK a bargain now the share price is near 1,333p?

Biopharma company GSK looks like a decent stock to consider for the long term, so is today's lower share price…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Could December be a great month to buy UK shares?

Christopher Ruane sees some possible reasons to look for shares to buy in December -- but he'll be using the…

Read more »

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

Sticking to FTSE shares, I’d still aim for a £1,000 monthly passive income like this!

By investing in blue-chip FTSE shares with proven business models, our writer hopes he can build sizeable passive income streams…

Read more »

Growth Shares

BT shares? I think there are much better UK stocks for the long term

Over the long term, many UK stocks have performed much better than BT. Here’s a look at two companies that…

Read more »

British Pennies on a Pound Note
Investing Articles

After a 540% rise, could this penny share keep going?

This penny share has seen mixed fortunes in recent years. Our writer looks ahead to some potentially exciting developments in…

Read more »