Stock market investing might be easier than we think, according to Chris Montagu and the equities research team at Citi.
They have identified that the strategy of investing in so-called high quality stocks has returned between 5% and 7% a year on average since 1995.
All you have to do is pick out big, boring stocks, with decent profit margins, low debt, and reliable income flows.
And then sit back and wait.
They tracked high quality stocks like France’s L’Oreal, Sweden’s Hennes & Mauritz, and Admiral Group in the UK and found the strategy worked.
It was less risky than trying to pick out more volatile stocks that had room to grow and benefited from economic uncertainty all over the world.
And here’s the chart:
So about £100 of quality stock in 1995 is worth more than £400 now, despite all the crises between now and then. Easy, right?
Well, not quite. The Citi analysts hedged their bets by saying that a hike in interest rates might blow this strategy out of the water. Presumably along with all other types of stock market investment.
Business Insider Emails & Alerts
Site highlights each day to your inbox.