Investing in the FTSE 100 has never been a way to generate consistent returns. The index has always experienced market crashes, downturns and bear markets. However, over the long run, it has a solid track record of recovering from them to produce an annualised return of around 8%.
Therefore, it has been an attractive means of improving your chances of making a million. With it now appearing to offer a wide range of cheap shares, it could be a significantly better investment than other assets such as Bitcoin.
FTSE 100 return prospects
The FTSE 100’s recent market crash was not widely anticipated. However, all of its previous bear markets were also not correctly forecast by most investors. By its very nature, the index is an unpredictable investment that has a large random element in its short-term performance.
This could mean that, over the short run, the index experiences significant volatility. However, the valuations on offer across UK shares suggest that many of them offer wide margins of safety. This could lead to high returns in the long run. Therefore, buying a diverse range of them to benefit from the index’s likely long-term recovery could be a sound means of building a surprisingly large portfolio in the coming years.
Making a million
Making a million from the FTSE 100 is a realistic prospect for many investors during their lifetimes. For example, investing £350 per month over a 40-year time period at an 8% annual return would produce a portfolio valued at over £1m.
However, investing at the present time could help to reduce the amount of time it takes to obtain a seven-figure portfolio. Many of the index’s members trade on valuations that are significantly below their historic averages. Buying them at such a time has historically been a sound means of capitalising on the stock market’s inherent volatility. This could equate to above-average returns that catalyse your portfolio’s returns in the coming years.
Focusing on stocks
With the FTSE 100 currently trading around 17% down on its level from the start of the year, it is understandable that investors will consider purchasing other assets, such as Bitcoin. The virtual currency has doubled from its March lows, and some investors may feel that it could continue its recent trend.
However, its lack of data means that there is no way of accurately gauging its value. This could mean that investors buy it while it trades at what proves to be an excessive price. It also has competition from other virtual currencies, while its regulatory risks may hold back investor sentiment.
Therefore, investing in FTSE 100 shares for the long run could be a sound move. It may allow you to build a £1m+ portfolio through buying cheap stocks and holding them for the long term.