COMMENT
The FTSE Best & Worst Performers

The first half of 2005 draws to a close today. This can be a good time to settle back with a cup of hot cocoa and reflect on what has been going on in the stock market.

Six months ago, the FTSE opened at 4,814, and today it stands at around 5,100. This represents a rise of almost 6%. And there are dividends of around 2% to add on top of this, as the majority of payments are made in the first half of the year. Historically, the UK stock market has returned an average of 11% per annum, so more of the same in the next six months would lead to an above average year.

Mind you, averages can be quite deceptive especially when we look at some the top and bottom performers. Here then is the list of best and worst five performing FTSE shares, excluding dividends, since 1 January.

Oil companies feature strongly amongst the top performers. This reflects in part the strong rise in the price of crude that has surged to an all-time high. Shell has also benefited from a move to ditch its archaic dual-listing structure. In the meantime, takeover activity has boosted Allied Domecq, and talk of a possible bid has lifted Scottish Power.

Amongst the worst performers, Kingfisher is a notable laggard as consumers rein back on spending. The slowdown in the housing market has not helped it either, as fewer households splash out on home improvement projects. Another retailer in the doldrums is supermarket chain Morrison. It seems that Sir Ken Morrison may have bitten off more than he can chew when he bought Safeway.

What strikes me about the two lists is the difficulty in picking winning shares over the short term. Who, for instance, could have correctly guessed that oil prices would climb above $60 a barrel, that Allied Domecq would get taken over and that Sir Ken Morrison would struggle to integrate a simple, albeit large, supermarket acquisition?

Of course, there's more to investing in shares than just picking a few short-term winners. Investing in the stock market is a long-term pursuit, and requires a lot of time and effort to study the various companies if you plan to pick your own shares.

For most of us though, an index-tracking fund is the most suitable vehicle to get our first exposure to shares. That's because an index tracker will simply mimic how well the stock market is performing. What's more, you can save money through a tracker on a regular basis too, and benefit from long-term capital growth. So start investing in an index tracker now!

David invests in a FTSE 100 tracker and also owns shares in Shell.