This is how much £1k invested in a FTSE 100 tracker 10 years ago would be worth now

The FTSE 100 (INDEXFTSE:UKX) could offer further capital growth in my opinion.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investing in the FTSE 100 a decade ago could have been seen as a risky move by many investors. The index was trading at around 5,200 points after what had been one of the most challenging periods in its history.

The financial crisis had caused the index to halve compared to its 2007 peak. Although it had delivered a strong recovery in the months following this decline, the prospects for the global economy continued to be highly uncertain in 2010.

Despite this, the index has gone on to deliver a 46% capital return since then. This works out as an annualised return of 3.8%. When dividends are added to this figure, the total return is over 8% per annum. As such, investing £1k or any other amount in a FTSE 100 tracker fund 10 years ago would have been a shrewd move, with it now likely to be worth around £2,150.

Market cyclicality

While many investors would have felt nervous about buying FTSE 100 shares in 2010 due to the difficulties posed by the financial crisis, the track record of the index shows that it has always recovered from its downturns to post new record highs. Examples include the 1987 crash, as well as the bursting of the tech bubble. Therefore, while the financial crisis was a deeper and larger crisis than the FTSE 100 had perhaps ever seen before, the index ultimately recovered within a matter of years.

This highlights the cyclicality of the index, and why it can pay to buy large-cap shares while they trade on low valuations. They can provide you with a more favourable risk/reward ratio which ultimately leads to higher returns in the long run.

FTSE 100 outlook

While buying shares today may not seem as risky as it did a decade ago, a number of challenges could be ahead for investors. They include the ongoing trade war between the US and China, Brexit negotiations and geopolitical risks in the Middle East. Any one of these risks, as well as a range of other threats, could derail the FTSE 100’s current bull run.

As such, investors seem to have factored in many of the risks faced by the index. It offers a dividend yield in excess of 4% despite experiencing strong growth since its post-financial crisis lows, while many of the index’s members trade on lower valuations than their historic averages. This may mean that now is a good time to buy a tracker fund, with the index offering long-term growth potential.

Beating the market

For investors who wish to try and beat the FTSE 100’s performance, a number of sectors such as banking, retail, industrials and energy appear to offer wide margins of safety. Buying high-quality companies at low prices could enable you to generate even higher returns than the index in the long run. With it being cheaper than ever to build a diverse portfolio and the index appearing to offer good value for money, now could be a good time to buy stocks – just as it was a decade ago.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Peter Stephens has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

Bargain buy? The Unilever share price just hit a 52-week low!

Earlier today, the Unilever share price dropped to a one-year low. The shares are now bouncing back but nowhere near…

Read more »

pensive bearded business man sitting on chair looking out of the window
Investing Articles

The Dr. Martens share price just crashed 25%! Time to buy?

The Dr. Martens share price has plummeted. Is this an opportunity for our writer to add the stock to his…

Read more »

Mindful young woman breathing out with closed eyes, calming down in stressful situation, working on computer in modern kitchen.
Investing Articles

Dr. Martens: is this collapsing FTSE 250 stock now a contrarian buy?

Shares of this well-known FTSE 250 firm just dropped to a record low following a poorly received report. Is this…

Read more »

Snowing on Jubilee Gardens in London at dusk
Investing Articles

Why I’d start putting money into dirt cheap UK shares this December

Our writer isn't waiting until the New Year to consider opportunities for his share portfolio. Here are some reasons why…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

What are the best shares to buy in December for 2024?

Christopher Ruane explains why he's not waiting until 2024 to make moves in the stock market and would be happy…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

£5k of savings? I’d target income of £7,544 a year by investing in just 3 dividend shares

I'm building a portfolio of dividend shares to give me a passive income in retirement. It's astonishing how the rewards…

Read more »

Passive income text with pin graph chart on business table
Investing Articles

One dividend giant I’d buy over Aviva shares

Aviva shares still look a good buy to me, but I think right now another high-yielding dividend stock looks even…

Read more »

Newspaper and direction sign with investment options
Investing Articles

I would grab these cheap shares before prices rise again

With the UK market in a slump, this Fool UK contributor is looking at buying up some cheap shares before…

Read more »