The FTSE 100 contains around 80% of the London Stock Exchange’s market capitalization. So it’s little wonder that it’s home to some of Britain’s most well-known businesses and brands.
Constituents of the FTSE 100 belong to a variety of sectors including oil majors, financial institutions, and multinational consumer goods firms. Some recognisable names on the index include AstraZeneca, BAE Systems, Diageo, and Lloyds Banking Group.
Traditionally, the FTSE 100 index is thought to be more stable than its peer, the FTSE 250. This is because it contains larger conglomerates paying out reliable dividends. Many of its constituents also have an international presence.
Pandemic uncertainty
As if you didn’t know, we’re amid a global pandemic that is causing extreme stock market volatility. It’s an unprecedented situation, and most companies and individuals are ill-equipped to deal with it. So, although it’s disheartening to see your favourite companies cancel their dividend payments, we can but hope it’s a short-term reaction.
For beginners to stock market investing, this could be a great time to get started. A market crash can provide the perfect opportunity to buy top quality companies when they’re undervalued.
Which FTSE 100 shares look good?
I like companies that have been established a long while and provide value to their customers. Diageo is one such company, as it creates over 200 of the world’s most popular alcoholic drinks. The Diageo share price has been volatile lately, but it has a product that people want and that’s not going to change. The demand may even increase if we go deep into a recession.
AstraZeneca is another. It creates lifesaving drugs and is actively contributing to the effort to combat the coronavirus. It has joined forces with GlaxoSmithKline in establishing a joint lab at the University of Cambridge. Here, it aims to process 30,000 COVID-19 tests per day for the UK government by early May.
AstraZeneca is also attempting to develop coronavirus-neutralizing antibodies in a separate trial.
Both these companies have an international presence and many years of experience. The AstraZeneca dividend yield is 3% and Diageo’s is 2.7%.
Market crash hazards
Buying stocks during a market crash doesn’t come without its hazards. It’s important to use your common sense and buy businesses that are likely to go the distance. Big promises or dreamy visions of exciting things to come can be seductive. But try not to let these notions misguide you. Stay alert and take care not to buy shares in companies heavily laden with debt.
Buying a slice of a high-quality company at a knockdown price, is the perfect place to start your investing journey. To make it a successful one, you’ll need to demonstrate patience, discipline, and resilience.
Investing for the long term usually means buying and holding for a minimum of 5 years, but possibly many more. The global financial crisis we’re experiencing has only just begun and recovery may take years. You can still find many quality companies among the FTSE 100 constituents and I think this is a good time to buy those you have confidence in.
