Several friends have recently told me that they’d like to make 2020 a year of investing in preparation for their retirement years. They’ve read that over the past year, the FTSE 100 and the FTSE 250 rose about 12% and 23% respectively. And while these returns don’t take include dividends received or the reinvestment of that income, they’ve read that the average yield of the FTSE 100 is about 4.5% and the FTSE 250 is about 2.8%.
Getting started in long-term investing is probably the hardest part of the whole investing journey. Today, I’d like to introduce you to several companies in the FTSE 250, to show how £10,000 invested in early 2010 would have fared since then and how those shares — and others — could set any of us on the path to a richer retirement.
FTSE 250 shares
The FTSE 250 index was launched on 12 October 1992. Companies in it usually have a more domestic focus so they’re more directly affected by shorter-term developments in the economy and consumer sentiment.
I regard it as a better barometer of the UK economy than the FTSE 100, where most companies are multinational conglomerates.
Since around 50% of the FTSE 250’s income is derived from the UK, domestic events, such as the result of the general election and developments around Brexit, clearly matter to its more immediate performance. But over the past 10 years, the FTSE 250 index has still managed to increase from 9,510.11 to 21,988.19 (by 3 January 2020). That’s an 8.74% compound annual growth rate (CAGR).
Thus, £10,000 invested in the index on the first trading day of 2010, would have become £23,114.97 at the end of last week, even without the return from dividends.
While past performance may not exactly be repeated in the months ahead, the FTSE 250’s track record highlights its growth potential — no surprise as it’s home to many well-managed companies that have robust earnings.
Star performers
Let’s look at the share price performance of just five FTSE 250 shares over the previous decade.
- Future: The share price has increased from 16.75p to 1,456p. CAGR: 56.28%. £10,000 would have become £869,028.51 (plus dividends, current yield is 0.07%).
- 4imprint: The share price has increased from 125p to 3,380p. CAGR: 39.06%. £10,000 would have become £270,409.69 (plus dividends, current yield is 1.5%).
- Games Workshop: The share price has increased from 255p to 6,165p. CAGR: 37.51%. £10,000 would have become £241,736.83 (plus dividends, current yield is 2.6%).
- Safestore Holdings: The share price has increased from 157.5p to 810p. CAGR: 17.79%. £10,000 would have become £51,414.33 (plus dividends, current yield is 2%).
- Unite Group: The share price has increased from 301.9p to 1,260p. CAGR: 15.36%. £10,000 would have become £41,740 (plus dividends, current yield is 2.3%).
A Fool’s view
Congratulations if you bought them all 10 years ago! Hindsight is 20/20 and it’s clear that investing in any one of them (especially Future) would have generated great returns. But you don’t have to buy obvious high-flyers to enjoy strong returns as the past year’s 23% rise of the FTSE 250 as a whole shows.
Regular stock market investing is one of the best wealth creation engines. And if I were to write a similar article in 2030, I’m certain I’d cover many other companies with robust returns.
I hope you will seriously consider starting your investment journey. And I think the FTSE 250 is a great place to start. Buying into good companies and not selling when markets are volatile should make your money work harder for you.
