Sometimes people have to accept that we don’t always make the best investment decisions. Therefore, I thought I’d turn to ChatGPT and ask it to name the top growth stock in the S&P 500.

Which one is generative AI’s favourite?

The generative artificial intelligence (AI) tool initially gave me a list of six companies from the index. Technology giant Nvidia (NASDAQ:NVDA) was the first name on the list. Surprise, surprise.

The other names were Amazon, chipmaker Advanced Micro Devices, defence company Axon Enterprise, and cybersecurity firm Fortinet.

”Can you narrow it down to one company?” I next asked it. Nvidia was the answer.

The reason given was the company’s domination of the graphics processing unit (GPU) market and leadership in the AI revolution. It touched on the tech giant’s expensive valuation, but thought this was justified because of the company’s strong growth and outlook.

In all truthfulness, this didn’t enlighten me. The points it provided were very basic and generic, so, I was somewhat disappointed.

My thoughts on Nvidia

I agree that Nvidia is a great company. Its growth frankly astounds me. Revenue is set to rise by a staggering 112% in FY25. It’s then expected to rise by 52% in FY26.

Achieving this level of growth as a small company is difficult. However, it’s particularly exciting to see the company turn $27bn of sales in 2023 into an expected $196bn by 2026. For a blue-chip stock, this is seriously impressive.

The success is also feeding into its bottom line. In the last quarter, earnings increased by 168% year on year.

For this reason, the stock price has risen by 859% since the start of 2023, leading many to believe Nvidia stock is expensive. However, I disagree with this notion. I actually believe its forward price-to-earnings (P/E) ratio of 32.8 is cheap for the firm.

Nvidia’s GPUs are becoming a cornerstone in the AI sector. It also looks likely to dominate the AI arms race with growth rates that are far superior than the already strong compounded annual growth rate (CAGR) of 37% for the industry.

One concern I do have about the company is potential Trump tariffs. If materials to produce its products become more expensive because of these, it could have a very detrimental impact on the company’s earnings.

My qualms with ChatGPT

I want to finish this article by saying that while I understand why it chose Nvidia as its top choice, I’m disappointed that it missed out Palantir (NASDAQ:PLTR) from its initial list.

The company was the biggest winner in the S&P 500 in 2024, with its shares rising by 341%. This is because it’s also experiencing accelerated growth from the rise of AI.

However, maybe the generative AI tool had its reason. For a company with a market cap of $155bn, Palantir’s trailing 12-month revenue of $2.6bn is concerning. Any weakness could send the stock price falling. For example, an insider sold $36m of Palantir stock a few days ago (7 January), which prompted an 8% share price drop.

Regardless, I don’t think ChatGPT provided me much use in my quest to find the best growth stock in the S&P 500. I believe it’s still better for an investor to do their own thorough research instead of using AI for stock-picking purposes.

Passive income’s often linked to side hustles or far-fetched schemes like solar farm leasing. But I know a much simpler, more accessible way to generate it – one that actually works and fits the definition perfectly. It’s passive because it requires little effort, and it’s income because it starts flowing almost immediately.

I’m talking about investing in FTSE 100 companies with regular earnings, loyal customers, proven business models and a history of paying high and rising dividends.

FTSE 100 companies work for me

This isn’t risk-free. Share prices can fluctuate and dividends aren’t guaranteed. But I offset these risks by diversifying across a spread of companies.

An investor with £10,000 – or even just £500 – can make a great start. Dividends should begin rolling in soon and, given time, compound to grow further. 

My calculations suggest £10,000 in UK blue-chips could eventually yield more than £400 annually in passive income.

But there’s a catch. This won’t happen overnight. Investing is a long-term process. While the effort’s minimal after the initial stock selection, patience is essential.

Did I mention the income’s tax-free? By using a Stocks and Shares ISA, there’s no income tax on dividends and no capital gains tax on share price growth for life.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Even the most reliable UK companies carry risks. Profits can decline, competitors can disrupt markets and regulations can shift. To manage this, a wise investor might split £10k evenly across five shares, known as diversification.

I avoid chasing the highest-yielding shares blindly. For example, telecoms giant Vodafone offered a tempting 10% yield, but its dividend will be cut in half shortly.

By contrast, FTSE 100-listed Imperial Brands (LSE: IMB) has a trailing yield of 5.88% and this looks more sustainable. A £2,000 investment in Imperial Brands would have delivered £118 in dividends. That’s just in the first year.

Imperial Brands has a mighty dividend

Reinvesting those dividends buys more shares, creating a virtuous cycle of compounding growth. Imperial Brands also rewards investors with share buybacks. On 8 October, it announced plans to repurchase up to £1.25bn of shares by October 2025.

Even better, its share price has risen 40% in the past year, delivering capital growth alongside dividends. However, there’s risk. Smoking’s a declining business. While smokeless alternatives could help, they might face regulatory hurdles too.

I personally avoid tobacco stocks, but if I didn’t then Imperial Brands would be on my shopping list.

Let’s say an investor built a diversified portfolio of dividend growth stocks delivering an average total return of 8% annually, including reinvested dividends. In the first year, their £10,000 investment would generate £800.

Over 30 years, that £10k could grow to £100,626, assuming the same 8% average compound growth. At that point, withdrawing 5% annually would yield £420 a month.

The earlier an investor taps into the income, the less they’ll earn. But the longer they stay invested, the greater the rewards. And with minimal effort.

When looking at the meagre share price returns of the FTSE 100, it may be tempting to ignore the index altogether. Why bother with it in an ISA when all the really sexy returns are being generated in New York?

However, overlooking the Footsie in favour of higher potential returns elsewhere can be a mistake. For proof, consider these three blue-chip shares. Five grand invested in each of them just two years ago would now be worth around £55,000 in total!

Rolls

The star of the show has been Rolls-Royce (LSE: RR). Since the start of 2023, shares of the iconic engine maker have soared 520% higher!

That was when CEO Tufan Erginbilgiç took the helm. Since then, international travel has bounced back and there’s been a significant rise in defence spending. Rolls’ profit margins and balance sheet have improved massively.

Looking ahead, the company forecasts underlying operating profit of £2.5bn-£2.8bn by 2027, up from an expected £2.1bn-£2.3bn last year.

However, the stock now trades at 27 times this year’s forecast earnings, which isn’t cheap. It suggests to me that much of the anticipated growth is priced in.

Therefore, if earnings come in light — because of ongoing supply chain issues, for example — then the stock could fall sharply.

M&S

Perhaps surprisingly, the next stock is Marks and Spencer Group (LSE: MKS). Shares of the posh supermarket are up by a whopping 178% since January 2023.

I don’t follow M&S too closely, but clearly I should, since it returned to the FTSE 100 in mid-2023. The reinvigorated company has achieved market share gains across clothing and food categories for four consecutive years.

On 23 December, it recorded its biggest ever day of food trading, while its online joint venture with Ocado is now delivering a record number of orders per week.

However, one risk worth noting here is the recent rise in the National Insurance and minimum wage announced in the UK Budget. To preserve profits, M&S may be forced to pass these higher costs on to customers. This might prevent it taking more market share in the ultra-competitive supermarket industry.

IHG

Finally, shares of InterContinental Hotels Group (LSE: IHG) have been on fire, surging 111% in the past two years to sit just off an all-time high.

Like Rolls, IHG has enjoyed a strong recovery in travel since the pandemic. It owns a diverse range of brands, including Crowne Plaza, Holiday Inn, and InterContinental (luxury).

In Q2, global revenue per available room (RevPAR) grew 3.2%, then ticked up another 1.5% in Q3. Impressively, the latter was achieved despite a 10.5% drop in RevPAR in Greater China. This highlights the strength and quality of the firm’s diverse global portfolio.

After its two-year doubling, the stock is trading at 24 times this year’s forecast earnings. That valuation doesn’t leave much room for error if, say, weakness in China spreads to the Americas and Europe.

Foolish takeaway

Admittedly, there was an element of cherry-picking here. Yet all three shares are well-known blue-chips, not obscure names.

Moreover, 3i Group stock (up 172%) actually did better than IHG, as did International Consolidated Airlines Group (up 148%).

So this proves that there are likely plenty of wealth-building UK stocks about, just waiting to be found.

The third Monday of January is often called ‘Blue Monday’. Apparently this is when we’re all cold, skint, and back at the metaphorical millstone. For many, it would be nice to have a sizeable second income to call upon.

Here, I’ll explore how £20k in savings could be put to work in the stock market in order to lay the foundations for such a sum.

Beginning the journey

At last count, there were nearly 4m Stocks and Shares ISA accounts subscribed to in the UK.

I’m surprised it’s not more, to be honest. That’s because these fantastic vehicles offer the chance to invest up to £20k a year in shares, bonds, or funds without paying tax on returns, including income.

Consequently, it’s possible to build wealth much faster in a Stocks and Shares ISA. And this makes them a no-brainer for newbie investors, in my opinion.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

But what return is realistic?

According to the latest data, the average annual return for a Stocks and Shares ISA is just under 10%.

However, that doesn’t mean all investors enjoy that return every year. The stock market doesn’t go up in a straight line and individual shares do fall, while dividends aren’t guranteed.

For example, the S&P 500 rose 23.3% during 2024. This was largely driven by shares related to artificial intelligence (AI), notably Palantir Technologies (up 360%) and Nvidia (+177%).

In total, 66% of stocks delivered positive gains for the year, which means 34% didn’t. Clearly then, some people lose money in the stock market, while others generate much higher returns than the average.

But I think 10% is a realistic long-term target for most investors, as the ISA return figures demonstrate.

What shares to consider buying?

An investor can buy dividend shares, growth stocks, or a combination of different types of stocks. In the latter group, I believe Coca-Cola HBC (LSE: CCH) is worth considering. I own shares myself.

The FTSE 100 company is a partner of The Coca-Cola Company. It manages bottling, distribution, and sales in 28 markets across Europe and Africa, while the US soda giant oversees branding and formulas.

There are a few things I like here. First, its portfolio of brands is unsurprisingly rock-solid, including Schweppes, Fanta, Sprite, Costa Coffee beverages, and of course Coke. These top-tier brands enable pricing power.

Second, despite high inflation and weak consumer spend, Coca-Cola HBC is still growing. This year, City analysts expect it to increase its earnings by around 10.7%. And this is expected to feed through to a 10% rise in the dividend. The forward yield is 3.35%.

Finally, the valuation looks reasonable. Right now, the forward price-to-earnings (P/E) ratio is 13.5, broadly in line with the wider FTSE 100.

One risk worth mentioning is ongoing boycotts of well-known US brands in Muslim-majority countries due to America’s support of Israel in Gaza. For the firm, these include Egypt and Bosnia.

Getting to £50k

Twenty grand alone isn’t enough to generate a sizeable second income, but it can lay the groundwork.

If an investor adds a further £500 a month, and reinvests dividends instead of spending them, then their ISA would grow to £833,821 after 25 years.

At this point, a portfolio yielding 6% could be throwing off £50,029 a year in dividends.

It’s never too late to begin investing for a large passive income in retirement. Here’s how a £500 monthly investment could generate a passive income of £23,974 after just 25 years.

1. Sidestep the taxman

The process of investing can be expensive business. Brokerage fees, software costs, and website subscriptions can all cost a pretty penny when added up.

However, the biggest expense by far is what we have to pay the taxman. Over many years this can add up to tens or even hundreds of thousands of pounds.

Fortunately investors can minimise or even eliminate their tax obligations by using an Individual Savings Account (ISA) or a Self-Invested Personal Pension (SIPP). With these products, an individual doesn’t pay HMRC any capital gains or dividends they receive.

Stocks and Shares ISAs have an annual investment limit of £20k. For a SIPP, this sits at £60k, or a sum equal to one’s yearly salary, whichever is lower. These tend to be more than enough for the vast majority of Brits.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

2. Build a diversified portfolio

With their SIPP and/or ISA set up, an investor could then consider building a diverse portfolio to maximise their long-term returns.

They can do this by purchasing:

• Different types of assets to manage risk, from safe-haven bonds to riskier shares.
• Multinational companies offering access to a variety of regions.
• Businesses operating across different industries and sub-sectors.
• A blend of value, growth, and dividend shares to provide a stable return across the economic cycle.

Diversification isn’t just an effective way to reduce risk. An investor who spreads their capital can also enjoy stronger returns by gaining exposure to various growth and income opportunities.

3. Look far and wide

Modern investors have the opportunity to buy a wide range of shares, trusts, and funds. So investors should consider looking past the London stock market to see what other share exchanges also have to offer.

Consider Nvidia (NASDAQ:NVDA), for instance. UK investors can gain exposure to artificial intelligence (AI) through various London-listed stocks including Sage and Kainos Group. But in my opinion, these domestic companies don’t have the considerable growth potential of this US-listed company.

This is because Nvidia’s high-power graphic processing units (GPUs) are critical for the growth of AI. While competition from other chipbuilders is growing, Nvidia currently sets the industry standard, and its newly launched Blackwell chip might see it move further away.

With strong cash flows and a capital-light business model, Nvidia has the financial clout to accelerate product innovation, too, and to dominate the AI sphere for years to come.

A near-£24k passive income

With these three strategies, an investor could reasonably target an average annual return of 9.4%. This number is based on the average annual returns delivered by the FTSE 100 and S&P 500 during the past decade

With a £500 monthly investment, this person would have made a healthy £599,362 over 25 years if their plans work out. This would then provide an £23,974 passive income for around three decades, based on an annual drawdown rate of 4%.

The Self-Invested Personal Pension (SIPP) can be an excellent tool to build long-term wealth. And it’s not just because investors are protected from having to pay tax on any capital gains or dividends they make.

It’s also due to the healthy amounts of tax relief individuals enjoy. This ranges from 20% for a basic-rate taxpayer, to 40% and 45% for higher- and additional-rate taxpayers respectively.

Here’s how an investor could use one of these tax-efficient products to build a £1k monthly passive income in retirement.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Cash vs shares

As with the Individual Savings Account (ISA), SIPP users can choose to use their invested capital in a variety of ways.

As with a Cash ISA, they can choose to hold their money in cash. Or they can choose to invest in a selection of UK and overseas shares, funds, and trusts as they would in a Stocks and Shares ISA.

Holding cash can be a good idea to manage risk, whether that be in a SIPP, ISA, or other savings product. However, having too much in savings instead of investing capital elsewhere can have a significant impact on an individual’s retirement goals.

Targeting £1k a month

Today, the interest rate on cash holdings in a SIPP ranges between around 2.5% and 3.5%. That’s pretty low, and is likely to head southwards as the Bank of England (likely) continues cutting interest rates.

Let’s see how this could impact someone’s plans for retirement.

To have a monthly passive income of £1k in retirement, one will need to have a £300,000 pension pot. To reach this goal with cash savings paying, say, 3%, someone would need to contribute £515 a month (including tax relief) for 30 years.

This is far higher than if they decided to invest their money in a FTSE All-Share Index tracker fund instead. If they chose this route, they’d need to make a far lower monthly contribution of £288*.

Alternatively, someone who could invest that £515 a month in a fund instead of holding it in cash could reach that magic £300k marker in less than 23 years (22 years and six months, to be exact*).

* Figures are based on the FTSE All-Share Index’s 10-year average annualised return of 6.2%. They exclude broker fees and fund management costs.

Fund magic

Funds such as the SPDR FTSE UK All-Share ETF (LSE:FTAL) can offer the best of both worlds to investors. Why? They allow individuals to chase higher returns while simultaneously allowing them to spread risk across hundreds of different stocks.

The FTSE All-Share encompasses the FTSE 100, FTSE 250, and FTSE Small Cap Index. In total, it consists of around 600 different companies, comprising 98% of the entire market capitalisation of the London stock market.

These include blue-chip heavyweights like Lloyds, Legal & General, and Rolls-Royce, alongside fledgling growth shares. Thus they provide investors with the chance to enjoy big returns through large capital gains as well as abundant dividend income.

They may provide poorer returns than cash during economic downturns. But as you can see, funds like this can be a great way to build money for retirement over the long haul.

Savings can be put to work in the stock market to earn a second income, in the form of dividends paid by some shares. That can be lucrative and lets investors benefit from the success of proven blue-chip companies without having to do any of the hard work themselves.

Here is how an investor could target an average monthly income of £560 by investing £9k, while sticking to large, proven UK companies.

Getting started

The first thing an investor might consider is the practical question of how to put the money to work. To that end, I think it makes sense to survey the wide array of share-dealing accounts and Stocks and Shares ISAs available.

Each investor has their own objectives and financial situation, so I think it can be helpful to take time and find what seems like the best match.

Building an income machine

With that done, it is then possible to start buying shares. I use the plural on purpose. Even the most promising share can disappoint.

Dividends are never guaranteed to last and there is also the risk of a share price going down. So diversifying across a varied range of shares is a simple but smart risk-management strategy.

Imagine that such a diversified portfolio of blue-chip FTSE 100 shares generates an average dividend yield of 7% (something I discuss in more detail below).

Seven percent of £9k is £630 a year. So what about the target of £560? By taking a long-term approach to investing and reinvesting (compounding) the dividends then after 35 years, a 7%-yielding share portfolio ought to be generating £560 a month in dividends.

If 35 years sounds like too long to wait, the same approach could also work on a shorter timeframe. In that case, the monthly second income would be less.

On the hunt for dividend shares to buy

That 7% may not sound a big number, but most FTSE 100 shares do not offer as high a yield as that. In fact, it is close to double the current average.

But some blue-chip shares do offer such a yield, or even more right now. As an example, one income share I think investors should consider Is insurer Aviva (LSE: AV).

The FTSE 100 share yields 7.3%. It has also been growing its dividend per share handily in recent years, though that comes after a big cut in 2020 (a reminder that no dividend is ever guaranteed to last).

It has a strong position in the UK insurance market. And if its takeover of rival Direct Line is successful, that could become even stronger. Economies of scale could also help the combined company’s profit margin.

Insurance is a large market with strong ongoing demand. I see Aviva as well-positioned to capitalise on that, thanks to strong brands, a large existing customer base (many of whom buy multiple products from the firm) and vast experience in underwriting.

Will the dividend last, let alone keep growing? As Direct Line itself proves, insurers can suffer badly if they misprice risks. Given its strong market position, that is definitely a risk I see for Aviva.

On balance though, I see the 7.3%-yielder as a share investors should consider.

When investors are feeling good, the S&P 500 can take off like a rocket. This was certainly the case in 2024 when the US benchmark share index surged 23%.

It wasn’t just the tech giants like Nvidia, Tesla, and Amazon that soared in value. Shares across the S&P 500 ripped higher on hopes of sustained interest rate cuts that would boost growth and, by extension, corporate profitability.

But what shoots higher when confidence is up can crash to earth when optimism wanes. This has been the story so far in 2025, with investors questioning the outlook (and the lofty valuations) of last year’s risers.

According to analyst Kathleen Brooks of XTB, “momentum and growth had been powerful drivers of the S&P 500’s rally in 2024 [but] they have now reversed“.

This switch has seen “value shares outperforming” growth and momentum stock in recent days, Brooks noted. She added that “it’s too early to know if this is a trend, but it is definitely something to watch“.

Rising gloom

US shares are selling off for a variety of reasons, including:

• Signs of stubborn inflation that may limit global interest rate cuts.
• Strong US economic data that could temper rate cuts by the Federal Reserve in particular.
• Fresh fears over China’s economy.
• Worries over immediate new trade tariffs from US President Trump.

Some of these concerns aren’t new. However, the huge valuations on S&P 500 shares are making investors reassess whether current stock prices accurately reflect the risks and challenges ahead.

The forward-looking price-to-earnings (P/E) ratio on S&P 500 stocks is currently an enormous 29.5 times.

In this climate, it’s perhaps no surprise to see demand for US value shares picking up. Low valuations leave a wide margin of safety in case of earnings shocks related to macroeconomic events.

A value share to consider

As a long-term investor, my bullish view on the S&P 500 remains in tact. History shows that share prices always rebound following crises. And I’m expecting the US stock market to continue its decades-long ascent, driven by the ongoing technological innovation and the large domestic economy.

However, I can take steps to reinforce and protect my portfolio by adding some value stocks. Alphabet (NASDAQ:GOOG) is one I think is worth serious consideration today.

For 2025, the Google and YouTube owner trades on a forward P/E ratio of 21.8 times. This is comfortably below the S&P 500 average of near 30 times.

It’s also some distance under an average of 47 times for the index’s broader information technology sector.

Alphabet’s cyclical operations leave it vulnerable during economic downturns. It also faces increasing competition from other search engines and social media providers.

However, the tech giant also has considerable growth potential as the digital economy continues expanding. I’m particularly taken by its progress in the field of artificial intelligence (AI) and its potential in other growth sectors like cloud computing and autonomous vehicles.

In the current climate, I think buying cheap US shares like this is a great idea to consider.

Passive income ideas come in many shapes and sizes. One I like – and indeed use myself – is as simple as buying shares in blue-chip companies then collecting the dividends.

That can be fairly lucrative. It also means that, rather than try and start some low-effort business from scratch myself, I can benefit from the hard work and competitive advantages of already successful FTSE 100 businesses.

As an example, here is how an investor willing to adopt a long-term approach could target close to £1,000 of passive income each month by investing £20,000 in the stock market.

Getting ready to invest

A first move would be preparing the groundwork to start buying shares, even if those shares are yet to be decided upon.

There is a wide variety of different share-dealing accounts and Stocks and Shares ISAs available. Before putting £20k into one, I think it makes sense for an investor to decide what might seem best for their own financial circumstances and investment objectives.

How to build long-term dividend income streams

At face value, the goal I am discussing here may seem impractical. £980 a month is £11,760 a year. For an investment of £20k, that would represent a dividend yield of close to 59%.

Even if there was a FTSE 100 share that yielded 59% (and there are none anywhere near), that alone would be a massive red flag for me. On top of that, I would never put all my eggs in one basket so would diversify across a number of shares.

But remember that I said I was discussing a long-term approach here. Long term can be an investor’s friend. Not only does it mean that a great company bought at an attractive price can hopefully prove its worth, it also allows time for dividends to be reinvested – and, in turn, hopefully earn more dividends themselves.

That simple but powerful approach, known as compounding, can be a major force magnifier for the savvy investor.

If an investor put £20k into a portfolio of shares yielding an average 9%, then after 22 years of compounding that portfolio ought to be throwing off passive income of more than £980 a month, on average.

Finding shares to buy

In fairness, 9% is hardly an average yield for a FTSE 100 share. That currently sits at 3.6%.

But that does not mean 9% is unachievable. As an example, consider one share in my portfolio: Legal & General (LSE:LGEN). The FTSE 100 financial services provider currently offers a dividend yield of 9.3%. Management has also set out plans to grow the dividend per share annually.

It has done that since a cut in the wake of the financial crisis, bar one year during the pandemic when the payout per share was held flat.

Thanks to a large target market, strong brand, sizeable customer base and proven capability to generate excess cash flows that can fund a dividend, I feel confident that Legal & General could keep growing its payout in years to come.

Will it happen? The business has reported weaker profits in the past couple of years and one risk I see is stock market turbulence leading policyholders to pull out funds, hurting profits.

However, I plan to hold the share and hopefully keep earning passive income from it.

There are different ways to try and build wealth. One I use is buying stakes in proven blue-chip businesses that I hope can grow in value over time, as well as potentially paying me dividends along the way.

At the moment, some FTSE 100 shares look like bargains to me, so I am excited to keep making the most of this strategy in 2025!

A share isn’t cheap because of price alone

What do I mean when I talk about “bargain” shares? It can be tempting to look at a penny share and think it is cheap just because the price is in pennies. But, as Warren Buffett says, “price is what you pay and value is what you get”.

In other words, price is just that. It does not indicate whether something is cheap or expensive. For that, we need to know what is being bought and make a judgement about its value compared to what it costs.

Why would a stock be a bargain?

The theory sounds well and good. But it may raise a question: why would a well-known FTSE 100 share be selling at a bargain price?

After all, the rest of the world can – if it chooses to – see the company accounts and information about a firm, just like I can. So if it is a bargain, why are they not buying the share and pushing up the price?

There are different possible explanations and it is also important to remember that a lot of this is based on judgement. I judge that a company is worth a certain amount while another investor thinks it is worth more or less. There may be no objectively correct answer.

To illustrate, look at the share price chart for AstraZeneca over the past year.

The business has had good and bad points during that period. But objectively, was it really worth over a quarter less at the start of November than it had been two months before? I doubt it.

Exploiting weak prices as investing opportunities

As an investor though, that sort of price volatility is not necessarily a bad thing. In fact, it can be great as it presents opportunities to buy into proven blue-chip companies at an attractive price (what market professionals call the “entry point”).

As an example, one share I think investors should consider is M&G (LSE: MNG). It too has had its fair share of price volatility over the past 12 months, selling as high as £2.41 and as low as £1.70.

In other words, at its highest price, it was 42% above its lowest price. That is just within one year. Over a longer timeframe, it has moved around even more.

Are there risks that could help explain some of the price weakness? Sure there are. In the first half of last year, for example, the core business saw clients take out more funds than they put in. If that trend continues, profits could suffer.

Still, M&G has proven an able generator of excess cash. Thanks to  a strong brand, large client base and high demand for asset management, that should continue to be the case, in my view.

That has helped the firm grow its dividend. Its yield now stands at 10.2%, among the highest of any FTSE 100 share.