It is now exactly 15 years since the FTSE 100 hit its all-time high of 6930, on Millennium Eve.
A lot has happened since, including the tech crash, 9/11 terrorist attacks, Iraq, the rise and fall of the BRICs, the credit crunch and all that followed, including rampant money printing and negative interest rates.
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If you had told somebody 15 years ago that Britons would finally discover a use for the Millennium Dome, they would have laughed in your face.
And if you had told them Britain’s index of leading stocks would actually be lower in 2014, they would have stared, amazed.
It’s Been A Great 15 Years
Here’s another thing they would have done: sold all their stock market investments in despair.
But that would have been a mistake. Because even though the headline number is still lower today, the FTSE 100 would still have returned more than 50% even if you had invested at the very worst possible time.
And if you had invested in the FTSE All Share, your total return would be more than 70%.
Since the vast majority of investors will have invested at much lower prices during the last 15 years, they will have done far better than that.
So a number that should destroy the case for investing in the stock market does precisely the reverse.
Imagine how much you would have made if the index was actually higher today?
How Income Grows
Dividends are a key reason the UK market can make you rich despite its apparent losing streak, but only if you reinvest them for growth.
If you had invested £10,000 in the FTSE 100 on 31 December 1999 and taken your dividends as income, you would have just £9,137. Ploughing them back into your shares hikes that to £15,213.
It’s a similar story with the FTSE All Share. Your £10,000 would be worth £10,500 if you had taken the dividends, £17,206 if reinvested.
With the FTSE 100 currently yielding a juicy 3.53%, the sums still work in your favour.
And you can earn yields of well over 5% a year from stocks such as BHP Billiton, BP, Centrica, GlaxoSmithKline, Royal Dutch Shell, Vodafone Group and WM Morrison.
Timing Isn’t On Your Side
If you had been lucky enough to invest £10,000 in the market at the best possible moment, 12 March 2003, and sold when the index hit its recent 52-week high of 6878 on 4 September 2014, you would have made a 218% return.
That would transformed your £10,000 into £31,800.
Timing the market in that way is impossible, unfortunately. The truth is most investors will have made somewhere in between.
They would have made a lot more than you might think over the last 15 years, but only by regularly reinvesting those dividends.