FTSE 100 vs S&P 500: why investing in home-grown stocks may make more sense for retirement

Our writer explains why he prefers FTSE 100 stocks when planning for retirement. But that doesn’t mean giving up on growth opportunties abroad.

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Building a retirement pot with the FTSE 100 makes sense for UK investors — it’s the index of our biggest 100 companies, think Shell, HSBC and Unilever, churning out steady dividends and value.

But is it more preferable than the S&P 500? I think so, and here’s a few reasons why.

Value and income

The Footsie tyically yields over 3.5%, almost double the S&P’s 1.7%–2%. That means more cash for retirement without selling shares.

Plus, it’s cheaper on valuations — the average price-to-earnings (P/E) ratio is around 12-13 versus the S&P’s 20+. This means slower growth, but less bubble risk.

And of course, no worries of pound‑to‑dollar currency swings hurting returns.

So what should investors look for when picking stocks for retirement?

Boring and reliable

Unlike flashy tech stocks that come and go, retirement portfolios require long-term reliability. In most cases, this means boring companies — think utilities, healthcare and insurance.

Solid balance sheets are key, backed by consistent earnings growth and dividend histories of 20+ years. P/E ratios under 15 exhibit good value, while a return on equity (ROE) over 12% is sufficiently profitable

Balance and diversification

Besides the sectors mentioned above, it can help to diversify into areas like energy, banking and consumer goods. I prefer individual stock picks but investment funds offer a simpified way to target broad diversity.

It also pays to consider some smaller mid-cap stocks for added growth opportunities. For example, 60%-70% in blue-chip FTSE 100 shares for stability and income, 20%-30% in the FTSE 250, and the rest in cash or bonds. 

Scottish Mortgage as a growth example

When it comes to picking between the FTSE 100 and S&P 500, Scottish Mortgage Investment Trust (LSE: SMT) offers an attractive balance.

The trust aims to harness the growth potential of top tech names such as Nvidia, Tesla and SpaceX, while smoothing out volatility through broad diversification.

Although it invests heavily in AI, biotech and EVs across US, China and Europe, an additional mix of healthcare and retail stocks provide defensiveness.

The price is up 400% in 10 years, equating to annualised growth of 17.5%. But the last five years were bumpy, with tech dips driving losses. Still, the net asset value (NAV) has recovered 22.9% in the six months to September 2025, beating global indexes.

But while the AI boom and green energy shift boosts its top holdings, it’s not bulletproof. With 20%-25% allocated to private equity, it’s harder to value than traditional stocks, which can lead to surprise swings. 

Plus, the heavy concentration in US tech mixed with China tensions and general market volatility add risk.

Appealing for UK retirement

For Britons, Scottish Mortgage has long been a go-to trust for multi-year compounding. It’s a popular choice for ISA investors, offering global exposure with FTSE familiarity and no US tax hassles.

Although volatility’s a concern, the fund’s extensive diversification helps reduce sector-specific risk. With the share price currently trading slightly below NAV, it’s worth considering for investors with a 10-20 year outlook.

As part of a diversified portfolio focused on value and income, it can help add an element of steady growth. But it’s one of many promising shares I’ve been eyeing up lately.

HSBC Holdings is an advertising partner of Motley Fool Money. Mark Hartley has positions in HSBC Holdings, Scottish Mortgage Investment Trust Plc, and Unilever. The Motley Fool UK has recommended HSBC Holdings, Nvidia, Tesla, and Unilever. 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.

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