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He FTSE 100 It will not be the best place for all investors. No, everyone should base their choices on their own needs and their own research. But it's the place I most want to put my money in 2024 and beyond.
In the United States, both S&P 500 and Nasdaq continues to reach new all-time highs. In fact, the S&P 500 is up 23% so far in 2024, while our dear old FTSE 100 is up just 9%. And the Footsie has yet to match the 52-week high of 8,474 points it reached in May.
So is the UK stock market a loser and best avoided? No, it's still my favorite, for a few key reasons.
But low, right?
The main reason is that I want to buy stocks when they are cheap. Isn't that what everyone wants? It could make economists happy when stock markets are hot. But if we plan to keep buying stocks over the long term, we should surely want prices and valuations to stay low.
My other key reason is that I mainly prefer dividend stocks and the FTSE 100 has some of the best yields I can find. We're looking at a forecast average dividend yield of 3.7% this year, including all lows, rising to 4% in 2025. Those are just regular dividends and don't include any special ones.
And we also have what should be a long-term boost from the £50 billion in share buybacks that have been announced so far in 2024.
Long time favorite
As an example, let's look at one of my top FTSE 100 stocks, Aviva (LSE: OFF.)
The five-year stock price chart above may not look very good. But it's exactly what I want and I hope it remains unimpressive for a few more years.
What it means is that I can buy more Aviva shares with a forward price-to-earnings (P/E) ratio of 12 this year, forecast to fall to 9.2 by 2026 (based on the current price).
And it could earn a whopping 7% dividend yield, if those forecasts are accurate. Oh, and analysts believe it will continue to rise in the coming years, too.
Risks
Aviva's dividend, like any dividend, is not guaranteed. The insurance sector also carries cyclical risks, and the current optimistic outlook could change faster than one would expect. Inflation and uncertainty about interest rates are not helping.
Investing in this sector, as in any sector, means that we must understand the companies we buy. And that brings me to another reason why I like FTSE 100 stocks so much.
I understand the insurance sector reasonably well, especially in the context of the UK market and economy. And that should give me an advantage.
In a nutshell
In short, investing in FTSE 100 shares puts me in businesses I understand in the economy I know best. And in times like these, you can maximize my chances of buying low and hopefully securing years of dividend income.
Oh, and there are other sectors of the FTSE 100 that I also like and understand, also with good valuations. Therefore, there is a lot of room for diversification.
