2025 has started well for the London stock market. We have seen the flagship FTSE 100 index of leading British shares hit an all-time high, for example.
Despite that, I have been buying FTSE shares lately. Here are three reasons why.
Don’t confuse the broad market with specific opportunities the market offers
If you told me car prices or house prices had hit an all-time high, I would wonder whether that meant now might be a bad time to splash the cash.
What about shares?
A high property market does not mean there are not individual bargains – and when it crashes, some properties may still be overvalued.
It is the same with the stock market.
The FTSE 100 can ride high but it is a sum of 100 parts. Not all of those individual parts will be doing equally well.
The same story is seen in the FTSE 250 and FTSE 350. The performance of an index is not necessarily correlated to the performance of an individual share within it.
Taking the long-term investing approach towards wealth creation
As an example, consider retailer JD Sports (LSE: JD).
Over the past year, the FTSE 100 index is up 13%. But JD Sports – a member – has been going the other way.
In fact, the the share price is now 26% below where it was 12 months ago.
There are reasons for that.
A series of profit warnings has shaken City confidence in the retailer’s prospects as well as the credibility of its outlook. The economic outlook remains subdued, which may damage consumers’ willingness to shell out on pricy trainers. Performance at Nike has been underwhelming and Nike is a key part of JD’s product offering.
Still, the company remains solidly profitable. It has a large customer base, global reach, and a proven business model.
It has been taking steps like buying a US rival and opening new shops that cost cash in the short term, but can hopefully generate it in the long term.
As a long-term investor, I think is as good a time as any to buy into what I see as great businesses — if I can do so at an attractive price.
Even within the FTSE 100, I see some such opportunities. JD Sport is one example, which is why I have been buying it.
Money sitting idle is largely unproductive
I do not buy shares for the sake of it. If I do not see any opportunities I like, I am happy to let the money sit in my Stocks and Shares ISA gathering dust and perhaps some fairly meagre interest. But if I can try and make my money more productive, I do.
So, rather than waiting for years, this February I am actively looking for shares to buy.
If I find none, fine. But in fact I continue to see value in some FTSE companies so am striking while the iron is hot.
