As I write this Tuesday morning, the FTSE 100 index is trading just above 7,000. It is very likely that it could continue to fall. But I don’t think that is a reason to fear. Instead, I see this as yet another golden opportunity to buy great stocks at low relatively low prices. I say this is a great opportunity right now, because there is a huge possibility that this situation won’t last.
Why a FTSE 100 dip below 7,00 doesn’t scare me
It is one thing for the index to crash below 7,000. It is quite another matter for it to stay below these levels. I reckon it could stay below these levels only if the omicron variant becomes uncontrollable. So far, at least that cannot be conclusively said to be the case.
But I can see why investors are panicking. After all, we never really know what will come next. At the same time, I think we need to keep in mind that there is a possibility that things might just turn out fine. In fact, in another article today, I talk about three reasons why the stock markets could actually boom in 2022.
What I’d do now
So, if the index were to crash below 7,000, I would whip out my investing wish-list and buy stocks that I have long wanted to, but which were running up quite fast earlier. My typical investments are divided into the two categories of growth stocks and income stocks.
Among the growth stocks I like are FTSE 100 defensives, some of which have run up a lot during the past couple of years. Some examples include pharmaceuticals companies and technology-related ones, that are likely to see relatively firm demand despite any fluctuations in economic conditions.
However, I would also consider cyclical stocks that have a tendency to drop far more during times of uncertainty. Stocks in fields like mining, banking, and real estate are sensitive to stock market conditions and the macro-economic situation. If I have a long enough holding period of say 10 years or so, I could expect them to reap rich rewards over time. And buying and holding them when they are at abysmal levels might just be the best way of doing so.
My go-to dividend stocks
As far as dividend stocks go, I am again considering two kinds of stocks. The first is those with high and sustained yields. My go-to sector for these is utilities. I particularly like ones that are focusing on green energy, which is huge on policy agendas. I think these companies have much potential for promoting clean growth, which it important to me personally. Also, these stocks typically offer inflation-beating dividends, which I like right now because inflation is expected to be uncomfortably high in 2022.
But I would also consider stocks that offer high dividend growth, even if their dividend yield is low right now. Over time, I reckon such FTSE 100 stocks could be quite lucrative from the perspective of earning a passive income.
Manika Premsingh has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
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