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Some people think that doubling their money by FTSE 100 actions is a chimera. Of course, the chances of achieving it in a matter of days are very low. However, over several years, history shows us that this is actually possible. So if I had £2k saved up right now, here's how I'd try to make it happen.
Target growth and revenue
I'm going to allocate a good portion of my funds to growth stocks. After all, the FTSE 100 has some very large and mature companies that simply don't have the chance to grow at a rapid rate today. It doesn't make sense for me to invest there, but rather look for smaller companies in the index that have a chance to move forward.
I'm also going to allocate some money to dividend stocks. This might surprise some. However, with the ability to buy stocks with dividend yields in the 6% to 8% range, I think it's a smart move. Income will increase in the coming years. It also helps me rack up some gains even if my growth stocks have a slow period.
With both components together, my goal is to grow my portfolio by 12% annually. Thanks to the benefits of compounding, if I can do this for six years, my pot will double in size.
Diversify to reduce risk
When I try to plan something years in advance, I have to be careful with my assumptions. If I fail to meet my growth goals due to a stock market crash, some other black swan event, or simply poor stock performance, everything could go off plan.
However, to try and reduce this risk, I would divide my £2,000 between 10 shares. Doing this will help diversify the risk of a company grossly underperforming.
An example of it
As an example of a growth stock to include, I would choose easyJet (EZJ). The company was recently promoted back to the FTSE 100 and has good momentum at the moment.
The stock is up 20% over the past year as it continues to put pandemic travel woes behind it. The full year report carried the headline “Record financial performance in H2'23 with positive outlook for FY24“.
For example, overall pre-tax profit was £455m, an improvement of £633m on the 2022 loss. It's not just airline passenger numbers that are doing well. EasyJet Holidays continues to expect a customer growth rate of at least 35% by 2024.
It is true that it is difficult to survive in the travel sector. Flights are largely a price race to the bottom, given the lack of differentiation for short-haul travel. This remains a risk in the future.
If the stock could return to pre-crisis levels, it would have doubled in value. I think this is a viable level to aim for in the coming years.
