If I’d invested £5,000 in a FTSE 100 index fund 5 years ago, here’s how much I’d have now

The FTSE 100 has underperformed other major indexes recently. Royston Wild explains why investing in UK blue chips could still be a good idea.

| More on:
Young mixed-race woman looking out of the window with a look of consternation on her face

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

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.

The FTSE 100 is the UK’s flagship share index, and it attracts significant investor interest at home and abroad. It’s famous as the residence of major, well-established companies with massive global reach and expertise across sectors. Major names include Lloyds, BP, and AstraZeneca.

The Footsie is also seen a barometer for the health of Britain’s stock market and economy. Unfortunately, this has affected returns in more recent years due to tough economic conditions and extreme political turbulence.

So how much would I have made if I’d invested £5,000 in an FTSE 100 tracker fund back in November 2019?

Returns on £5k

The FTSE 100's performance since 2019.
Source: London Stock Exchange

Five years ago, the FTSE was sitting pretty at 7,346.53 points. Then the pandemic came and the world closed down, causing global stock markets to crash. The index came within touching distance of 5,000 points at one point.

There have been a few bumps along the way. But the flagship index has recovered steadily since then, hitting new record highs in that time (the current closing record of 8,433.76 was set in May).

At 8,267.03 points today, investors have enjoyed a 12.5% gain during the past five years. However, this doesn’t take into account dividend income.

With dividends factored in, the Footsie has delivered a total return of 33.1%.

Based on this, if I’d invested £5,000 in a FTSE 100 tracker fund in November 2019, I’d now have £6,655 sitting in my trading account.

Superior performances

That’s far from terrible. After all, share prices can go down as well as up. And with stock markets enduring obstacles like Covid-19 and surging interest rates in recent years, I could have well made a negative return.

Having said that, the FTSE 100’s performance over the period has also substantially lagged those of other major global indexes.

The US-based S&P 500, for instance, has delivered a total return of 100% in the past five years. And the Nikkei in Japan has provided a cumulative return of 80.5%.

A £5k investment in a fund tracking these indexes, therefore, would have delivered me £10,000 and £9,025 respectively, excluding the impact of currency fluctuations.

A top FTSE 100 share

Yet none of this means that the FTSE 100 is a poor place to invest today.

Past performance is not a reliable indicator of the future, for one. What’s more, some analysts believe UK shares may outperform their overseas counterparts in the coming years following their underperformance of recent years.

Associated British Foods (LSE:ABF) is one such stock I think could soar in value from this point. It’s fallen 15% in value over the past five years. And so it trades on an undemanding forward price-to-earnings (P/E) ratio of 11.3 times.

This is well below the FTSE 100 average of 14.3 times. And it, in my opinion, fails to reflect the sparkling potential of the firm’s core Primark budget clothing division.

Sales and adjusted operating profit here soared 6% and 51% during the 12 months to September. Despite competitive threats, Primark’s attractive prices and strong branding mean that customers continue to flock through its doors.

Encouragingly, ABF plans further rapid expansion in key European and North American markets to take earnings to the next level. If recent successes continue, I think it could be one of several FTSE shares that take off in the coming years.

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.

Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods Plc, AstraZeneca Plc, and Lloyds Banking Group Plc. 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

£21,392 to invest in an ISA? Consider UK shares for a turbocharged retirement

Saving rather than investing? Let me explain why putting money in a savings account instead of UK shares could be…

Read more »

Illustration of flames over a black background
Investing Articles

Just released: December’s higher-risk, high-reward stock recommendation [PREMIUM PICKS]

Fire ideas will tend to be more adventurous and are designed for investors who can stomach a bit more volatility.

Read more »

Investing Articles

£9k in an ISA? Here are 2 FTSE 100 stocks to consider for a juicy second income

There are plenty of quality UK shares to consider when attempting to build a second income. Here are two high-yielders…

Read more »

A senior man and his wife holding hands walking up a hill on a footpath looking away from the camera at the view. The fishing village of Polperro is behind them.
Investing Articles

No savings at 40? Just £5 a day invested in FTSE 250 stocks could unlock a £372k ISA

For the price of a coffee, Brits have a chance to build a healthy nest egg for their retirement. Here's…

Read more »

Investing Articles

Can I buy Elon Musk’s SpaceX on the stock market?

SpaceX is hot property and its valuation is surging. Dr James Fox explains how investors can gain exposure to Elon…

Read more »

A senior group of friends enjoying rowing on the River Derwent
Investing Articles

Considering an ISA for retirement? Here’s how investors could aim for £2,000 a month with dividend shares

Our writer outlines how a well-balanced portfolio of dividend shares in an ISA could lead to a decent stream of…

Read more »

Investing Articles

Here’s the BP share price forecast

BP's share price should be higher. That’s what analysts are saying, but things can move quickly in the hydrocarbons and…

Read more »

Investing Articles

Up 53% in 3 months! What’s fuelling the red-hot Burberry share price?

Harvey Jones is whooping it up as the dramatic Burberry share price recovery wipes out most of his losses in…

Read more »