There’s much to be said for holding FTSE 100 stocks patiently to reap great returns. It’s not the only way, some of you may argue. That’s true. But I still think it’s one of the more important investing strategies. And I have some proof for it, based on my two years of experience writing for The Motley Fool.
I went back to the first five FTSE 100 investment ideas I shared in my articles. The shares I had picked were Burberry, Unilever, Sage Group, Anglo American, and Smurfit Kappa.
Portfolio vs FTSE 100 returns
If I had invested an equal amount in each of these FTSE 100 shares on the day the article was published, I’d show a total return of 26% on my portfolio (as of Friday 24 December). By itself, the return on portfolio sounds pretty plump to me. This is particularly so, considering the stock market crash earlier in the year and the continued pandemic.
But I think the better way of assessing it is by comparing it to the FTSE 100 index’s performance. To do this, I first averaged the index value for each of the days that the stock purchase was (hypothetically) made between October and December 2018.
I then calculated how much it has changed as per the latest close, which is on 24 December at the time of writing. There are other ways of coming up with a comparable estimate, but this was the most straightforward one, which also gives a good indication of where we are at.
The results surprised me quite a bit, I have to say. Turns out that the FTSE 100 index has fallen on average by almost 7% in the two years. To put it in other words, the performance of this investment portfolio is 33 percentage points better than the index average.
There’s more.
Not all FTSE 100 stocks are made equal
As of the last close, every single FTSE 100 share in the portfolio showed a positive return by comparison. There are vast differences in the extent of gains, but at the very least the shares are headed in the right direction.
The biggest gainer is the FTSE 100 packaging provider Smurfit Kappa, whose share price is up 76% from then. It’s followed by the multi-commodity miner, Anglo American, whose share price is up almost 45%. These two make up most of the gains.
Others like Unilever, Sage Group, and Burberry have shown single-digit returns by comparison.
What to do next
I’d stay invested in them, however. All three companies have strong credentials. In fact, part of the reason their returns look relatively muted has to do with the timing of the calculations. One month later, for instance, things could look very different.
Now with the Brexit deal out of the way, I reckon there’s greater predictability about the UK’s future. With some more patience, I think these FTSE 100 stocks will also show great returns, like many others among FTSE 100 constituents.
