In 2015, the FTSE 100 passed 7,000 for the first time in its history. But it’s struggled to stay above that level since. And it dipped below it several times. Most recently it went under last week. But the stock rally of the past couple of days pushed the index above it once again.
There’s a wave of optimism driving the markets right now. So, should I start investing in a tracker fund following the fortunes of the UK’s lead index of the largest 100 public companies?
And to answer my own question, I should. Or to be more precise, I am. And I’ve been investing regular monthly sums into a FTSE 100 tracker fund for some time.
An all-weather investment
But I wouldn’t invest in the Footsie just because it’s crossed some arbitrary number. To me, the index is an all-weather investment. And I’m committed to keeping up my payments into the tracker fund each month wherever the index goes.
One of the big advantages of my tracker is the income it pays. I see the index as more of a dividend-led investment than anything else. And it sits alongside the dividend-paying shares in my diversified portfolio. To me, it’s important to reinvest that shareholder income along the way. So, I’m holding the accumulation version of the fund because it ploughs the dividends back in automatically.
And it’s all in the name of getting on the right side of the compounding process. Every time I reinvest a dividend there’s a little bit more to earn the next dividend on. And that’s one of the keys to long-term wealth creation. The way I can build gains on top of previous gains is why compounding gets labelled as magical. However, it’s not really magic, it’s just mathematics.
But magic or not, the process of compounding can work to drive exponential gains over time. And because compounded gains get ever larger as the years pass, it’s important for me to keep investing in my tracker fund for as long as possible. In fact, I see the tracker as a lifelong investment.
There’s value within the index
However, on top of my Footsie tracker fund, I’m also invested in some individual companies in the FTSE 100. For example, I’m holding global luxury goods manufacturer, retailer and wholesaler Burberry. And I own shares in telecommunications and mobile money services provider Airtel Africa.
But they aren’t the only companies in the index that interest me. Several stocks look appealing right now and there’s some good value to be had.
Rightly or wrongly, I’m bullish about the prospects for many UK companies over all time frames. Although it’s always possible for my optimism to prove misplaced. And all shares carry risks as well as positive potential.
Nevertheless, I’m not going to stop my regular index tracker investments regardless of what happens next in the stock market.
