The world is stuffed with get-rich-quick schemes. Shopping for FTSE 100 shares is just not considered one of them, so far as I’m involved. Nonetheless, it may be a path to riches albeit at a extra leisurely pace.

The foundations of wealth creation

In concept at the least, getting wealthy is just not that sophisticated. Shopping for belongings for much less (ideally a lot much less) now than they are going to be value in future is one approach to do it.

FTSE 100 shares are a type of asset. However the important thing level, so far as I’m involved, is that they symbolize a stake in a a lot greater asset: an organization like Shell or AstraZeneca.

So by placing cash into such shares when they’re attractively valued, piling up (or reinvesting) any good points alongside the way in which and holding for the long run, I feel it’s doable to create wealth.

That relies upon, in fact, on including some cash within the first place. Proudly owning the correct shares will be one approach to construct wealth – however it takes at the least some cash to buy them to begin with.

Right here’s what can set FTSE 100 shares aside

Shares in far smaller, much less recognized and doubtlessly flashier corporations can usually appear extra fascinating to at the least some buyers.

Many individuals dream of placing a couple of kilos in some unknown penny inventory and hanging it wealthy.

It’s true that some small corporations go on to make large returns for early stage shareholders. However masses don’t. They merely promote increasingly more shares to lift money, burn that money and go bankrupt.

An excellent enterprise concept or product innovation is just not essentially the premise of an awesome funding for a small, non-public investor.

Against this, FTSE 100 shares can appear boring and stodgy. Some are mature companies in areas that appear to supply little or no future development alternatives.

However they’re large. In most (not all) instances, they’ve grown large by honing a profitable enterprise over many years. The market can lose sight of that and ship a share crashing in price sometimes.

I feel that provides a possibility for an investor to construct a diversified portfolio of nice corporations at engaging costs – and hopefully construct wealth.

Need to know what I feel an awesome firm appears like?

For example, JD Sports activities (LSE: JD) is value contemplating. To begin with, take a look on the share price chart over the previous few years.

See how a lot the price has moved round? Even over the previous 12 months alone, the most cost effective price has been lower than half the most costly one.

Has the precise worth of JD Sports activities’ enterprise seesawed as a lot as that in simply 12 months? I don’t assume so (although I may very well be unsuitable).

Somewhat, I feel buyers have struggled to worth the enterprise. Its stream of revenue warnings suggests shopper demand could also be weakening and JD’s retailer opening programme dangers consuming into earnings.

Nonetheless, the retailer does count on full-year revenue earlier than tax and adjusting objects of £915m–£935m. In opposition to that, its market capitalisation of £4.5bn appears low cost to me given JD’s robust model, confirmed enterprise mannequin, resilient earnings and rising worldwide footprint.