2025 has been a strong year for the FTSE 100 and wider UK stock market. Investors who piled into UK shares a year ago have been well rewarded.
I’ve been sent research by Fidelity International, which shows UK equities rising 19.96% this year. That’s almost double the return from the US stock market, which rose just 10.32%.
The UK market isn’t quite the world’s top performer. That crown belongs to emerging market equities, which surged 24.9%. Still, the result is impressive, and builds on last year’s 10.93% gain. Too many have written off the UK market. They’re the losers.
UK shares pay generous dividends, and once they’re included, the total return climbs to 22%. So £10,000 invested in a UK tracker would now be worth £12,200. Not bad for a single year.
FTSE 100 is flying
Personally, I prefer to purchase individual FTSE 100 stocks. That way, I hope to beat the index over time. This isn’t for everyone, as single stocks can be more volatile, but I think the potential rewards are worth it. And it’s a lot more fun than simply buying a tracker too, especially when those shares climb (not so much fun when they fall, which they do).
Stock picking can also deliver far more income than the 3.1% yield on the FTSE 100 as a whole. One of my best all-rounders this year is wealth manager M&G. Its shares have grown 38.6% plus a meaty trailing yield of 7.3%. That’s a total return of 45.9%, which would have turned £10,000 into £14,590.
It’s far from alone. I also hold Rolls-Royce Holdings, which is up another 90% this year. That would have turned £10k into £19,000. Shares in the aircraft engine maker have rocketed an astonishing 1,081% in three years. That would have turned £10k into £118,100, transforming the retirement prospects of the lucky investor.
Beating the benchmark
The overall top FTSE 100 performer of 2025 so far is Fresnillo, up 330% as gold demand rockets. I don’t own it and wouldn’t consider buying after such a run. Markets move in cycles and momentum can reverse. At the other end of the scale, media giant WPP has crashed 62%.
My shares in Lloyds Banking Group (LSE: LLOY) have done very nicely. They’re up roughly 72% this year and offer a trailing yield of 3.35%. Combined, that would have turned £10,000 into £17,535.
Like its fellow FTSE 10 banks, Lloyds took years to recover from the financial crisis. It now looks fighting fit. In full-year 2024, it generated profits of around £4.5bn, despite setting aside £1.15bn to cover compensation claims for motor finance mis-selling.
Lloyds shares have bounced back
Lloyds still lifted dividends by roughly 15% and rewarded investors with a £1.7bn share buyback. The valuation looks reasonable too, with a price-to-earnings ratio of 15, just below the index average of 17.
Some Motley Fool colleagues are wary of Lloyds after such a strong run, worrying about a slowing UK economy and pressure from falling interest rates on bank margins. Still, with a long-term view, I think it’s still worth considering for those seeking income and growth. There are plenty more FTSE 100 shares with attractive potential out there. And I’ll be targeting them, rather than buying a boring old tracker.
