Forget gold! I’d rather invest in these FTSE 100 shares today to aim for a million

Peter Stephens thinks these two FTSE 100 (INDEXFTSE:UKX) stocks could offer higher returns than gold over the long run.

| More on:

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.

While gold may continue to be a popular investment in the short run, due to its defensive characteristics, in the long run the FTSE 100 could offer higher returns.

The index’s track record shows it has the capacity to generate high single-digit returns over the long run. When compounded, they could provide a generous overall return that increases your chances of generating a seven-figure portfolio. With that in mind, here are two FTSE 100 stocks that currently appear to offer impressive risk/reward opportunities.

Glencore

The recent first-half results from mining company Glencore (LSE: GLEN) highlighted the challenges faced by the wider sector. The company’s profit declined by 32% compared to the same period of the previous year, with an uncertain macroeconomic environment having the potential to weigh on its short-term prospects.

However, the company continues to be upbeat about prospects for many of its key segments. In fact, the current challenges faced by the business could present a buying opportunity for long-term investors. The company’s valuation suggests a margin of safety is currently included in its share price, with Glencore trading on a forward price-to-earnings (P/E) ratio of around 10.5.

Looking ahead, the company’s diverse range of operations may reduce its overall risk and provide it with opportunities to deliver an improving financial performance. While its dividend payout may not be among the most resilient in the FTSE 100, a yield of 6%, that’s due to be covered 1.5 times by net profit next year, indicates the stock’s total returns could be impressive over the long run.

Smith & Nephew

Another FTSE 100 stock that could offer long-term growth is Smith & Nephew (LSE: SN). The medical technology specialist has a solid track record of delivering impressive growth in profitability. This could become increasingly valuable to investors during a period where the prospects for the world economy are relatively uncertain.

Since Smith & Nephew’s financial performance is less cyclical than many of its FTSE 100 peers, the company’s shares could become increasingly popular over the medium term. Even though they trade on a P/E ratio of around 22, they could be deemed worthy of a premium valuation should investors become increasingly cautious about the outlook for the world economy.

In the long run, an ageing global population could present solid growth opportunities for the business. Its forecast earnings growth rate of 8% for next year could be catalysed by rising demand for its products over the long run.

With the company benefitting from strong growth from emerging markets and its investments in a range of products, according to its most recent results, means its long-term prospects appear to be highly attractive. As such, now could be the right time to buy a slice of the business in order to benefit from its growth potential.

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.

Peter Stephens 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.

More on Investing Articles

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

2 high-yield FTSE 250 shares I’d buy today — and 1 that I’d avoid

UK markets have felt some volatility after last week’s Budget and the FTSE 250 was no stranger to it. Our…

Read more »

Investing Articles

3 reasons the Rolls-Royce share price could soar over the next decade

Sustainable aviation fuel, narrow-body aircraft, and small nuclear reactors could all keep the Rolls-Royce share price climbing over the next…

Read more »

British flag, Big Ben, Houses of Parliament and British flag composition
Investing Articles

Here’s how much income I’d get if I invested my entire £20k ISA in cheap BT shares

BT shares are on the up but still cheap, while the FTSE 100 telecoms stock offers a good yield too.…

Read more »

Investing Articles

2 FTSE dividend shares yielding more than 6% with P/Es of less than 9!

Harvey Jones picks out two brilliant FTSE 100 dividend shares that yield more than 6% but are selling at strangely…

Read more »

Investing Articles

Up 105% in a year! Is this rocketing FTSE bank the perfect pick for my Stocks and Shares ISA?

Harvey Jones is drawing up a shortlist of stocks to purchase inside his Stocks and Shares ISA allowance. This FTSE…

Read more »

Investing Articles

Down 78%, is this once-hot AI growth stock set to explode like the Rolls-Royce share price?

Our writer asks if he should invest in Super Micro Computer (NASDAQ:SMCI) following the growth stock's massive recent decline.

Read more »

Investing Articles

Is it madness to buy Palantir shares after Q3 earnings?

Palantir stock's surging again after the firm's Q3 earnings report. But after a 150% gain, is it too late to…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

£6,000 in savings? Here’s how I’d aim to turn that into £1,032 a month of passive income!

A small investment in high-dividend-paying stocks with the returns used to buy more shares can generate big passive income over…

Read more »