The last 10 years have been quite eventful for the FTSE 100. The UK’s flagship index has gone through two major corrections in 2018 and 2022, along with two market crashes in 2020 and now 2025. Yet despite all this volatility, long-term investors have been rewarded with some notable gains.
When factoring in the additional returns from dividends, FTSE 100 index investors have reaped an 85% total gain. On an annualised basis, that’s the equivalent of 6.4% per year.
Compared to the S&P 500’s 182% gain over the same period, UK shares seem to have been left behind. Yet, it’s worth pointing out that volatility has been significantly lower here compared to the US. And these gains are still sufficient for a £10,000 initial investment to almost double to £18,500.
But what if instead of investing in a low-cost index fund, investors had bought individual large-cap stocks?
Explosive winners
While some have underperformed, despite being some of the largest London-listed companies, several other FTSE 100 stocks have vastly outperformed their parent index.
AstaZeneca’s steady stream of new drug approvals and portfolio expansion has delivered a total annualised return of 7.5%. At the same time, demand for RELX’s data collection has pushed up revenue and margins, resulting in an 11.8% average annualised return. However, it’s the actual company behind the UK stock market, the London Stock Exchange Group (LSE:LSEG), that’s stealing the show with a 15.4% annual gain!
To put this into perspective, £10,000 invested in the stock in April 2015 is now worth £41,995. And that might just be the tip of the iceberg. A newly signed partnership with Microsoft to bring the firm’s data and analytics tools to the cloud opens the door to new growth opportunities, including AI applications.
The expected long-term benefits of this 10-year deal are likely why analysts are overwhelmingly bullish on the future of this enterprise, with 17 out of 20 recommending the stock as either a Buy or Outperform.
Of course, with this deal being a big driver of expected future growth, the stock may be doomed to tumble if the benefits fail to materialise. This risk is only amplified by the elevated valuation today at a forward price-to-earnings ratio of 26.1, even after the recent stock market tumble. But I still feel it’s worth considering.
Not everyone is a winner
Picking stocks is a challenging process. And even the most promising ideas can fail to deliver on expectations. Shareholders of Ocado (LSE:OCDO) know this all too well. The troubles at the online grocery store turned robotics automation business has been so severe that it actually lost its FTSE 100 status back in 2021.
While Ocado shares were seemingly off to a great start, management’s decision to aggressively ramp up its investments in automated warehouse technology sent earnings plummeting into the red. And while peak capital expenditure is now finally in the rearview mirror, the share price is still around 25% lower than where it stood a decade ago.
Ocado’s story certainly isn’t over. And its latest results did reveal a welcome surge in underlying earnings and free cash flow – two steps in the right direction. However, it highlights the potential risk of investing in bad stock picks, even when looking at FTSE 100 companies.
