Investing in FTSE 100 traded stocks may be an excellent choice for a sizable portion of people, and if you are new to investing or just looking to get some more assets under your belt, then the FTSE 100 would be a great place to start.
However, there are a few things you need to know about the FTSE 100 before investing, and if you are unable to come to terms with a few key premises, then embarking on this venture may not be the right decision for you. Let’s dive straight into it and talk about three tips that are going to help you have a much better time whilst investing in the FTSE 100.
This article is not financial advice – seek the services of a financial adviser if you feel uncertain about how to invest.
One of the most popular investments out there
One of the prime attributes of investing in an FTSE traded stock is their high stability and low volatility. This is namely due to the fact that your investment is being diversified and spread across a hundred of the top companies in the world, and once a company reaches that level of success, it is relatively difficult for them to be led astray.
Even on its own, the fact that your investment is being put into hundred companies does wonders for stability, and diversification is a key component of success for any investor. For these reasons, a FTSE 100 index fund can be one of the best funds to invest in. However, when you pair this with the fact that said businesses are some of the most successful in the world, it begins to become obvious why the FTSE 100 is notorious for its stability.
Many of the businesses that are in the FTSE 100 see stable growth year after year, and in reality, the only way we could see all of them crash at once is if a recession/depression were to take place.
This makes the FTSE 100 a useful investment for investors all across the spectrum – it could be ideal for both veteran investors and beginners alike. That’s not to say there is any risk at all; as is the case with all investments, the potential of you losing money is always there.
However, over a long enough period, the FTSE 100 usually performs consistently well, and any major price fluctuations are only going to occur when the entire market is in turmoil.
Get ready to wait 5 years
As a result of the FTSE100 stability, it also finds itself offering very little in terms of profit potential. Whilst you are likely to see consistent growth every year, it is going to take a long time for you to see any substantial gains.
By this, we do not mean a matter of months, or even years for that matter. No, if you are looking to see large gains from investing in the FTSE 100, you can expect to wait multiple decades for all of your efforts to bear fruit.
This means that investing in the FTSE 100 is first and foremost a long term strategy, and if you were coming into this with the hopes of getting rich quick, then you are going to come away sorely disappointed.
Indices like the FTSE 100 are best paired with other investments that have better profit potentials, and in truth, the FTSE 100 is an investment that you are just going to want to forget about and let do its thing. This also comes with another benefit of not having to monitor it at all, and it is not uncommon to hear about people putting a ton of cash into an index fund and leaving it for decades.
It’s not for the faint of heart
Even though the FTSE 100 almost always increases in value over the very long term, that’s not to say there aren’t going to be times when your investment could be halved in a matter of months.
Major world events and disasters can have an enormous effect on indices, and if you do not feel like you have what it takes to stick it out whilst things get back to normalcy, then getting involved with the FTSE 100 could be a terrible decision.
Pulling out at the wrong time because of panic can cause you to lose a staggering amount of revenue – potentially more so than with other investments. Keeping your cool is essential if you want to invest in the FTSE 100, and as long as you are willing to ride out any issues, you will be just fine.
All-in-all, investing in the FTSE 100 could be a fantastic choice for many, and if you are still on board with the idea after reading the entirety of this article, then it may just be a good idea for you to give it a shot.
The FTSE 100 is one of the few investments that are relatively beginner-friendly due to its relative stability and consistency, and it can be a great way to get your foot into the industry if you are not too comfortable with taking on too much risk.
If you follow the tips in this article, you will end up having an incredible experience investing in the FTSE 100, and we have no doubt it is going to play a key part in your investing journey for years to come. Good luck.