Image source: Getty Images
I looked up FTSE 250 shares for my next purchase. First, I think the time might be right.
I know that trying to time an investment can be a big mistake. It's all about timing the market, not timing the market, as the old saying goes.
But when we look at time in a broad sweep, we often see cyclical patterns. And I can't help but think we could be headed for a good spell for small stocks.
Bicycle pattern
In previous bull markets, the FTSE 250's outperformed the FTSE 100. The sub-index is home to stocks with a strong focus on housing, and more growth prospects. All of that brings more risk, but also more growth prospects than the top-shelf giants.
Conversely, in bear markets, investors tend to head toward blue-chip safeties, and the mid-cap index falls. Are we headed for a new bull market? That's a tough question. So far in 2024, the FTSE 100 is up 7.5%, while the FTSE 250 is up 6.5%.
I might not call that a bull market just yet. But with September inflation below target, I'm increasingly optimistic about the prospects for 2025 and beyond.
Discount growth
Finding the best growth stocks is not easy. But I love investment trusts, and there are a lot of them in the FTSE 250. So why not consider combining the two, and take something like this Baillie Gifford UK Growth Trust (LSE: BGUK)?
trust”aims to maximize long-term capital growth from investment primarily in UK listed equity shares with the potential to deliver a total return in excess of the FTSE All-Share Index.“.
And that should be most people's idea of what investing in FTSE 250 growth stocks is all about. It holds stocks like Auto Trader, Experian, Games Workshop, Howden Joinery… quite a diverse mix.
I'd say it's definitely a riskier mix than an income-focused trust or an FTSE 100 stock. And with a market mark-cap of only around £250m, choppy sentiment can mean a volatile share price.
But for now, we're looking at a 14% discount on the entire price of the item. Does that suggest growth stocks are cheap? I think it's possible.
Attractive benefits
The FTSE 250's are also home to investment firms abrdnwith a forecast yield of 8.6%. The stock market has not helped the share price. But I can't help but see the fear based on this being an FTSE 250 stock, and it's still volatile.
And then there is Greencoat UK Wind with a 7.9% yield on cards. It has no pricing power over the power it sells, and it has little debt. But it is one of the special real estate investment trusts I am considering buying.
Some include Supermarket Income REITwith a forward yield of 8.5%, too Basic Health Structures by 7.1%. Both share the risks of their fields, and the benefits are not guaranteed.
Please note that tax treatment depends on the individual circumstances of each client and may change in the future. The content of this article is provided for informational purposes only. It is not intended to be, and does not constitute, any form of tax advice.
An index that has everything
So in the FTSE 250 we have growth, capital gains, consolidated investments… more. What don't you like?
Source link
