COMMENT
When The FTSE First Hit 5,000

6 August 1997 witnessed one of the FTSE 100's many milestones. It was the day the London benchmark index crossed the 5,000 for the first time. Eight years (and some major ups and downs!) later, the blue-chip index today still hovers around the 5,000 mark. Long-term investing was never meant to be like this, was it?

Back in 1997, the market was booming. In the first seven months of that year, the FTSE 100 rallied 21% and notched up 40 all-time highs prior to breaching 5,000! It was a time when the top tier included names such as Asda, Burmah Castrol, Enterprise Oil, LASMO, LucasVarity, Mercury Asset Management, National Westminster, Orange and Thames Water. It was also a time when BTR, Carlton, Granada, Grand Metropolitan, Guinness, Halifax, Siebe, SmithKline Beecham and Zeneca operated as standalone businesses.

This table goes some way to explain the flat market performance since August 1997:

Among current FTSE 100 companies, the majority of significant gainers are (or were) relatively small and did not gain blue-chip status until some time after 1997. Indeed, Imperial Tobacco, the best performer among companies berthed continuously within the FTSE 100 since 1997, was the 98th largest blue chip when the index first breached 5,000.

In contrast, the largest reductions in value occurred mainly at well-known FTSE stalwarts, which, barring one or two exceptions (e.g. General Electric), remain in the leading index today. However, some famous FTSE names have done well since 1997. Notable winners include Royal Bank of Scotland (LSE: RBS) (up 183%), Tesco (LSE: TSCO) (up 123%) and Vodafone (LSE: VOD) (up 114%).

Still, anybody commencing regular contributions to a FTSE 100 index tracker on 6 August 1997 and making month-end payments thereafter will still be ahead... just. Assuming a 0.5% initial charge, 95 payments of £100 has subsequently grown into a pot worth £10,535 with dividends reinvested -- earning a £1,035 profit.

Notably, reinvesting dividends has made all the difference since 1997. If the payouts were spent instead, the tracker pot would now be worth £9,401 -- producing a £99 loss. Let's just hope the next eight years sees tracker returns supported by dividends... and capital growth!

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