Aren’t FTSE 100 shares annoying? First they push up through 8,000 points to set an all-time record. Investors cheer and throw their hats in the air.
Then we see a quick dive and a loss of more than 500 points. The sun turns to rain, and the hats fall in the mud.
But aren’t those emotions exactly the wrong way round? I think so.
Last week, I planted some rose bushes in my garden. Now the seller has a 20% sale. So what do I do? Curse my luck and abandon roses for life?
No, of course not. I just grinned and bought some more.
My shares
I have some Lloyds Banking Group shares. And they’ve fallen 15% since their peak. So what should I do, sell up and forget about shares?
Well, no. I want to keep buying shares for the next decade, or more. So it seems just as clear that I should do the same as with my roses. I should buy more.
If I invest £1,000 in Lloyds now, I’ll get 2,160 shares. Just a few weeks ago, I’d only have picked up 1,800. Isn’t that great?
I don’t know if I will buy more Lloyds just yet, as there are lots of other shares that look cheap in the money-off sales. But a Lloyds top-up is on my want list.
Regular investing
For me, the key to making money from the FTSE 100 is regular investing. It’s no good watching the charts and trying to decide the best times to get in and out.
We’ve seen that very clearly so far in 2023. Just a few weeks ago, investors were buying Rolls-Royce shares for 160p. Now they’re selling at 144p, when nothing has changed at the company at all.
They were buying Barclays shares at 199p, and now they’re selling at 137p. How does it go? Buy high and sell low? Oh no, that’s the wrong way round. But it’s what people are doing.
If we look at any FTSE 100 stock over the past year, we can see one key lesson.
Monthly buys
Picture someone investing the same amount in the same stock, each month, for a year. If the price moves in a straight line, they’ll pay an average price over the period.
But if the shares go up and down, something good will happen. If the share price suffers a sharp dip one month, they’ll buy more for the same money.
And if it should spike one month, they’ll buy fewer than if it had moved in a dull straight line.
They’ll pay a lower average share price in a stormy year than a calm year. And the more the share price moves, the lower the average will be.
Friend
FTSE 100 volatility is the investor’s friend, not enemy. And when markets are low, that’s when we should be lofting our headgear.
So I’ll just keep investing regularly, for at least 10 years. And I won’t fear FTSE 100 downturns. No. In fact, I’ll welcome them.
When prices are low, we can get more roses for the same money. Sorry, I mean shares. Who doesn’t want that?
