The S&P 500’s failed to deliver the sort of results in 2025 that investors have grown used to over the past decade. Several headwinds have got in the way, from renewed trade tariffs to concerns over Federal Reserve policy.
While American markets have wobbled, an index tracker closer to home has stolen the show.
The iShares Core FTSE 100 ETF’s (LSE: CUKX) up 13.8% year to date, compared with the S&P 500’s 9.3% gain. That makes it one of the world’s best-performing ETFs so far this year.
Its top holdings by weight are a Who’s Who of British blue-chips: AstraZeneca (7.81%), HSBC (7.39%), Shell (7.14%), Unilever (5%) and Rolls-Royce (4.1%). The expense ratio is a very slim 0.07%, which means most of the returns are passed back to shareholders.
But it’s worth noting that this year’s stellar rise is unusual and doesn’t happen often. Since inception, the ETF’s delivered annualised returns of 7.41% — broadly in line with the average returns of the FTSE 100 (when including dividends).
Over a decade, that works out to a cumulative return of 113.5%. Not bad for a low-cost, set-and-forget fund.
A better option?
Despite the strong showing from the ETF, I find myself more drawn to another fund entirely. The Scottish Mortgage Investment Trust’s (LSE: SMT) delivered even stronger gains so far in 2025, up 14.7% year to date.
More importantly, its long-term track record’s far more impressive. Since September 2005, the trust has generated a remarkable 1,274% total return. That’s equivalent to annualised returns of 14% a year over the past two decades.
Of course, past performance is never a guarantee of future returns. The fund’s heavy exposure to US tech adds concentration risk and foreign currency risk if the dollar loses value.
But Scottish Mortgage has something that a straightforward FTSE 100 tracker cannot match — true global diversification.
Yes, the portfolio focuses on high-growth technology names such as Nvidia, Microsoft and Meta. But it also invests in retail innovators including Meituan and MercadoLibre. Plus, it boasts healthcare plays such as Moderna and even private equity holdings including SpaceX and Databricks.
This spread across industries and geographies helps cushion the trust from region-specific risks and exposes it to some of the world’s most exciting businesses.
What it means for investors
The S&P 500‘s long been regarded as the benchmark for equity performance. Yet in 2025, it’s been left behind by a simple FTSE 100 tracker — and the more adventurous Scottish Mortgage.
That underlines the importance of looking beyond Wall Street when picking stocks. When building a portfolio with a multi-decade outlook, diversification’s critical to avoid extended losses from concentration risk.
For those eyeing a low-cost way to mirror the performance of the FTSE 100, the iShares ETF seems a sensible option to consider.
But for investors who are willing to embrace a little more risk in exchange for higher diversification and growth potential, I think Scottish Mortgage could be an even better fund to look at over the long run.
