Could now be the moment to start buying FTSE 250 shares?

The FTSE 250 has lost value over the past year. But from a long-term investment perspective, could that be an opportunity for our writer?

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.

Middle-aged Caucasian woman deep in thought while looking out of the window

Image source: Getty Images

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.

With the FTSE 100 recently breaking its all-time record, the leading index has been getting a lot of attention from investors. But while many people might be focussing on the main index, I have been spending time trying to figure out whether now could be a smart time to load up on some FTSE 250 shares.

Room for growth

While the FTSE 100 has hit a high, the smaller index has been falling. Even after climbing 21% since October, the FTSE 250 remains 7% below its level this time last year.

With a membership of medium-sized companies, I see the index as offering me more exposure to growth potential than the FTSE 100. As the economy has been struggling lately, I think we have seen a retreat to large, established companies in mature industries. That helps explain why the FTSE 100 has been hitting highs.

Should you invest £1,000 in ITV right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if ITV made the list?

See the 6 stocks

But, technically, the UK has now pulled out of recession. While I remain pessimistic about the outlook for the next couple of years, at some point I do expect significant economic growth to come back. That could be good news for FTSE 250 companies that have a proven track record of revenue growth, such as Kainos and Darktrace.

But if I wait until the economy is flying again, share prices may well have risen too. I think the time for me to invest could be ahead of a possible economic recovery that boosts FTSE 250 growth share valuations. In other words, now.

Finding shares to buy

That is why I have been searching for stocks from the index I can add to my portfolio.

I have looked at Darktrace but do not find its business model sufficiently attractive yet – I would like to see it consistently generating sizeable profits and free cash flows. Kainos appeals to me but its price-to-earnings (P/E) ratio of 49 does not.

Created with Highcharts 11.4.3Kainos Group Plc PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.co.uk

What I am looking for is a company like ITV, whose shares I own. It has a proven business model and consistent profitability, and also trades at what I see as an attractive valuation. Indeed, its P/E ratio is just seven. Can an old school broadcaster like ITV really be a growth story? I think it can, thanks to booming demand for its studio services along with a growing digital business thanks to a new streaming platform.

Building a FTSE 250 portfolio

But my confidence in ITV may be misplaced. The chief executive seems to struggle to communicate the business potential to the City.

I have been buying a diversified range of FTSE 250 shares, meaning that if one of them performs worse than I expect then hopefully the overall impact on my portfolio will be limited.

Hopefully I might also be right about what I see as some promising medium-sized companies that currently sell at attractive prices relative to how I think they might perform once the economy is humming again.

But there are other promising opportunities in the stock market right now. In fact, here are:

5 stocks for trying to build wealth after 50

The cost of living crisis shows no signs of slowing… the conflict in the Middle East and Ukraine shows no sign of resolution, while the global economy could be teetering on the brink of recession.

Whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be a daunting prospect during such unprecedented times. Yet despite the stock market’s recent gains, we think many shares still trade at a discount to their true value.

Fortunately, The Motley Fool UK analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global upheaval…

We’re sharing the names in a special FREE investing report that you can download today. We believe these stocks could be a great fit for any well-diversified portfolio with the goal of building wealth in your 50’s.

Claim your free copy now

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.

C Ruane has positions in ITV. The Motley Fool UK has recommended ITV and Kainos Group Plc. 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

Older couple walking in park
Investing Articles

Could £300 a month invested in US and UK shares reach a million by retirement?

Could an investor retire with a million pounds just by dedicating £300 a month to US and UK shares? Mark…

Read more »

Young Caucasian man making doubtful face at camera
Investing Articles

Is £800 enough to start an ISA?

Is it worth bothering with an ISA with less than £1,000 to spare? This writer believes it may be --…

Read more »

Investing Articles

3 reasons Tesla stock may be a long-term bargain

This writer is keen to buy Tesla stock at the right price. He doesn't think it's there yet -- but…

Read more »

Investing Articles

Nvidia stock is a lot cheaper than before – or is it?

Nvidia stock has been caught in the whirlwind of market volatility. This writer has been waiting to buy, so might…

Read more »

Top Stocks

3 FTSE stocks Fools are eyeing up for choppy markets

A selection of companies listed on the UK stock market on the watchlists of four Foolish investors.

Read more »

Young Black man sat in front of laptop while wearing headphones
Investing Articles

A £10,000 investment in Rolls-Royce shares last week is now worth this…

Harvey Jones says Rolls-Royce shares couldn't escape the volatility of recent weeks, but wonders if the recent dip is a…

Read more »

The flag of the United States of America flying in front of the Capitol building
Investing Articles

Prediction: in 2 years these S&P 500 stocks will be much higher than they are today

These two S&P 500 stocks have been beaten down in recent weeks. But Edward Sheldon expects them to move much…

Read more »

Investing Articles

10% yields! Why a volatile stock market is great news for passive income investors

The recent stock market volatility has given passive income investors the chance to earn double-digit returns. But they still need…

Read more »