After years of underperformance, the FTSE 100 index has all of the sudden burst into life. Not solely that, however its 27.7% whole return over the previous 12 months dwarfs that from the S&P 500 (round 13%).
Over 5 years, the return can be excellent — 61.1% earlier than dividends.
However what in regards to the 10-year return? How a lot would somebody have in the event that they’d invested £5,000 into the FTSE 100 a decade in the past? Let’s discover out.
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Spectacular returns
Over the previous 10 years, the annualised whole return of the FTSE 100 has been 10.1%. The full return consists of dividends in addition to worth positive factors.
Subsequently, a FTSE 100 index tracker would have turned £5,000 into roughly £13,000. Good.
The huge bulk of those positive factors have come extra lately, with the index gaining practically 40% in simply two years. A giant a part of this has been world traders looking for diversification away from the US inventory market resulting from three important causes.
The primary is President Trump’s unpredictable bulletins and insurance policies. One other factor that has boosted the FTSE 100 is its relative immunity to AI disruption — it’s filled with low cost non-tech shares that pay beneficiant dividends.
Solely round 1% of the index is formally categorised as info expertise. Most of it consists of banks, miners, oil majors, and pharma giants. These aren’t in concept threatened by AI, and may even profit from it.
Supply: iShares
In different phrases, the FTSE 100’s lack of tech publicity — lengthy been seen by many as its Achilles’ heel — has shortly develop into a energy. Against this, tech accounts for greater than 30% of the S&P 500, serving to clarify the sudden departure in efficiency.
Lastly, the FTSE 100 continues to be fairly low cost, at the least in comparison with the S&P 500.
So, is the FTSE 100 nonetheless price contemplating for the subsequent 10 years? I feel so, and traders might take a look at the iShares Core FTSE 100 UCITS ETF (LSE:CUKX).
This model is an accumulating ETF, which implies dividends are routinely reinvested again into the fund. The trailing yield is at the moment round 3.1%, however the revenue development prospects look sturdy for the FTSE 100.
In response to AJ Bell, pre-tax income throughout the index in 2026 might exceed £231bn. This could underpin dividends and share buybacks, which have additionally helped enhance the worth of many firms by making them extra worthwhile on a per share foundation.
After I take a look at the highest of the FTSE 100, I see a number of companies that ought to develop into bigger over the approaching decade. These embody HSBC, which has a powerful place throughout fast-growing Asia, and oncology large AstraZeneca.
Rolls-Royce additionally has a vivid future, with development alternatives throughout civil aviation (rising world journey developments), defence, and small modular reactors (SMRs). The inventory is costly proper now, however this issues much less inside a tracker fund (because it’s simply one among many).
In the meantime, I’m satisfied that miners will develop into extra useful in future. As a result of surging demand for copper and the shortage of recent mines, there’s anticipated to be a provide deficit for the pink metallic.
The FTSE 100 is house to mining giants like Antofagasta, Glencore, Rio Tinto, and Anglo American.
Whereas a sudden rotation away from worth to development is a danger for the FTSE 100, I feel the ETF is price contemplating for long-term traders.
