How I’d invest £1k in the FTSE 100 right now

At FTSE 100 has made a strong start to the year, reaching a three-year high of more than 7,700, and there may be more to come.

I spent the autumn buying cheap UK shares when the FTSE 100 dipped. I can’t stand it now that the market is going up. I have £1,000 in my trading account, and I’m looking for stocks to buy and hold for the long term. So where should I start?

Still a bargain in the FTSE 100

The first step is to look at why the FTSE 100 is on a roll, up 3.21% over the last five trading days.

The main reason seems to be that the US dollar has weakened, as investors expect the Federal Reserve’s monetary policy to ‘pivot’. As the US economy weakens, we are closer to the day when the Fed becomes dovish and easy to raise interest rates.

The prospect has boosted commodity prices, which are priced in dollars, and lifted mining stocks, which are heavily represented in the FTSE 100.

Anglo American up 7.82% in the week lifting the annual growth to 10.9%. BHP Group and Rio Tinto also doing well. But there is no guarantee this will continue. With the world recession, and China’s Covid reopening experiment hanging in the balance, demand for raw materials could easily fall. If that happens, it could hit commodity stocks and send the FTSE 100 down as well.

Which makes me wary of jumping into the current spike. I prefer to bide my time and choose my targets carefully.

I like my exposure to the mining sector, after buying Rio Tinto on October 8. It is up 16.26% since then. I bought a house persimmon three days later and is up 13.82% since then. Over the last year, it has crashed 52.68%. My purchase from Rolls-Royce on November 1 it was up 25.96%. Over the year, the stock price has dropped 18.51%.

Lots of cheap stock

All three looked cheap at the time, having fallen sharply in the previous month (or year in the case of Rolls-Royce).

So, is there a similar offer today? I argue that there is. The troubled telecom giant BT Group it may have spiked 9.95% in the past week, but it’s hardly overpriced trading at just 6.2 times earnings. The stock is down 53% in five years and 29% in one year.

BT has more than its fair share of problems, but as these days have shown, investors want to catch the rebound.

Barclays has also benefited from a brief bout of bullishness this year, rising 8.01%. But it is still down 16% measured in one year and 11% in five years, and has a low valuation of 4.6 times earnings.

House building has been on the rise, even as property prices have fallen. Valuations remain cheap, with Taylor Wimpey trades at six times earnings and yields 7.94%.

I have looked at the household goods giant Unilever for some time. The stock hasn’t moved much over the past week, and is trading only about 5% higher than it was one and five years ago. It’s now at the top of my wish list.

So a quick search has found four stocks that I will be adding to my portfolio at low and low prices. I will do more in-depth research and choose.