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I FTSE 100 it will not be the best place for all investors. No, everyone needs to base their choice on their own needs and research. But it's the place I most want to put my money in 2024, and beyond.
Across the US, both S&P 500 again Nasdaq keep hitting new all-time highs. In fact, the S&P 500 is up 23% so far in 2024, while our old FTSE 100 has put up 9%. And the Footsie has yet to reach the 52-week high of 8,474 points it hit back in May.
So has the UK stock market lost at that time, and best avoided? No, it's still my favorite, for a few important reasons.
But it's low, right?
The main reason is that I want to buy stocks when they are cheap. Isn't that what everyone wants? It can make economists happy when stock markets are on the rise. But if we plan to continue buying stocks for a long time, we should definitely want prices and valuations to stay low.
My other main reason is that I go big on dividend stocks, and the FTSE 100 has some of the best yields I can find. We're looking at a forecasted average yield of 3.7% this year, including all lows, rising to 4% by 2025. Those are just standard assignments, and don't include any specials.
And we have what should be long-term momentum from the £50bn in share purchases announced so far in 2024.
A longtime favorite
As an example, let's look at one of my top FTSE 100 stocks, Aviva (LSE: AV.)
The five-year stock price chart above, may not look good. But that's exactly what I'm looking for, and I hope it stays unsurprising for a few more years in the meantime.
Meaning I can buy more Aviva shares at a forward earnings ratio (P/E) of 12 this year, forecasts drop to 9.2 by 2026 (based on today's price).
And I could get a whopping 7% dividend yield, if those predictions are accurate. Oh, and analysts think it will continue to rise over the next few years as well.
Accidents
The Aviva dividend, like any dividend, is not guaranteed. The insurance industry carries cyclical risks as well, and today's wakeup call may change faster than we expect. Inflation and interest rate uncertainty do not help.
Investing in this industry, as in any industry, means we need to understand the businesses we are buying. And that brings me to another reason why I like FTSE 100 stocks so much.
I have a good understanding of the insurance industry, particularly in relation to the UK market and economy. And that should give me an advantage.
Bottom line
So to sum up, investing in FTSE 100 stocks puts me in businesses that I understand in an economy that I know best. And at times like this, it can increase my chances of buying cheap, and hopefully the key to years of profitable profits.
Oh, and there are other sectors of the FTSE 100 that I like and understand, and for good measure. So there is a lot of scope for diversity.
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