Here’s how buying a few FTSE 100 shares could help me build wealth

The idea of ​​investing in the stock market as a way to try and build wealth is old. I’m still thinking about the potential now and investing in some blue-chip stocks while I try to get richer. Here’s how I can go about buying just a handful of them FTSE 100 sharing.

Going for quality

There are thousands of shares I can buy on the UK and US stock markets. So why did I decide to focus on FTSE 100 stocks?

Basically, I like to invest in blue-chip companies with proven business models. To enter the FTSE 100, a company must achieve a certain market capitalization (as well as meet a number of other criteria). That often means that the company has done well in building a business with strong sales and a commercial model that is attractive to investors.

But that is not always the case. Also, past performance is not necessarily an indicator of what to expect next.

So, although I often look among FTSE 100 companies when picking stocks for my portfolio, I then look for certain attributes to try and find the kind of blue-chip bargains that will hopefully add to my wealth. This may be because the share price has increased over time and in some cases also because owning it can mean a profit.

Find stocks to buy

For example, I first consider whether the company has a large addressable market that is likely to generate substantial customer demand for years or decades to come. I think the FTSE 100 is filled with businesses that meet this criteria, from financial service providers like NatWest to miners such as Rio Tinto.

Next, I look at the company’s specific competitive advantages that can help it achieve a good level of profit. Again I think there are many FTSE 100 stocks that have that advantage. Some have unique brands, such as Unilever and Reckitt.

Others have proprietary technology, as seen in pharmaceutical companies AstraZeneca and GSK. Another edge of competition can come in the form of a complex distribution network established, as operated by National Grid and shell.

In other words, many shares of the leading UK index meet at least some of the buying criteria and allow me a lot of diversification.

Value of FTSE 100 shares

But does investing in these companies help me achieve my goal of building wealth?

Indefinite. Even a great business can be a bad investment. If I pay more for the stock compared to its intrinsic value, I can see the value depreciating not growing even if the business is doing well.

Calculating intrinsic value is not an exact science. That’s why, as an investor, I put a lot of effort into learning how to calculate stocks.

If I can use some spare money to buy to the right company at what I think is a bargain price, hopefully that can help build wealth over the years. I always maintain a diverse portfolio. But instead of buying many different companies, I focus my efforts on selecting smaller companies that I think offer tremendous commercial potential and an attractive share price.