So let’s say someone has a goal of earning an extra £1,000 each month. How many shares does an investor need to buy?

Crunching the numbers

The number of shares needed to earn £1,000 a month, or £12,000 a year, ultimately depends on which stocks an investor decides to buy.

Let’s start with one of the most popular investing strategies – index funds. The FTSE 100’s one of the UK’s flagship dividend-paying indices. Historically, the yield has sat around 4%. But following an impressive share price run in 2025, the index’s level of payout has fallen to around 3.3%.

That means a total of £363,640 will need to be invested in a low-cost FTSE 100 index fund to generate the £12,000 target second income. And looking at where the popular Vanguard FTSE 100 ETF (LSE:VUKE) currently trades, this translates into a total of 8,926 shares.

Obviously, that’s not pocket change. But by investing a small sum consistently each month over the long run, it’s possible to build to this position over time, even when starting from scratch.

Fortunately, the process can be significantly accelerated through stock picking. Investors can allocate their capital exclusively to the best and biggest yielding opportunities on the stock market. This not only opens the door to superior returns, but it also reduces the amount of money needed to reach passive income goals.

Exploring dividend stocks

One big FTSE 100 dividend winner of the last decade has been LondonMetric Property (LSE:LMP). The commercial landlord (which is a real estate investment trust — or REIT — with certain tax advantages) owns, manages, and leases a diversified portfolio of logistics, healthcare, retail, and entertainment properties to other businesses.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

While real estate is a cyclical sector, the long-term leases management has negotiated with tenants has generated fairly predictable and consistent cash flows. So much so that even with all the ups and downs, dividends have continued to flow. The result is 10 years of consecutive dividend hikes. And today, the yield stands at a far more impressive 6.8%.

At this rate of payout, investors seeking to earn £12,000 a year would only need around £176,470 of capital. That’s still significant. But it’s around half of what index fund investors need. And it translates into 95,390 LondonMetric Property shares.

Of course, dividends aren’t guaranteed. And in the case of Londonmetric, there are notable risks to consider. Higher interest rates are already wreaking havoc on the group’s property valuations. But more crucially, it puts pressure on its corporate tenants.

Long-term leases have so far mitigated the impact on LondonMetric’s cash flow. However, some critical lease renewals and rent reviews are on the horizon, which may put downward pressure on rental income due to higher vacancies or lower rental rates. And if earnings suffer, dividend growth could potentially be compromised.

Nevertheless, even with this risk, Londonmetric Property shares still look like a promising second income opportunity, in my opinion. That’s why dividend investors may want to consider investigating further.

The post How many shares must you buy to target a £1,000 monthly second income? appeared first on The Motley Fool UK.

Of course, then the new £20,000 annual allowance kicks in. How much tax-free passive income could a stock investor generate from that amount? That’s the topic I want to explore here.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Index average

The answer depends on what investments an individual buys. Each one will have its own dividend yield, contributing to the portfolio’s overall yield.

If an investor sticks their 20 grand into the Vanguard FTSE 100 UCITS ETF (LSE: VUKE), the yield would be 3.46% (as of 28 February).

The FTSE 100 has dipped a bit in March, so let’s call that 3.5%. What this means is that £20k invested in this FTSE 100 index fund would be expected to earn about £700 back in dividends.

Is that any good? Not if we’re just talking about income — fixed-rate Cash ISAs are still offering interest rates of 4.4%. This means £20,000 in a Cash ISA could safely yield £880 annually, surpassing the dividend income from the FTSE 100 index fund.

However, the FTSE 100 also has the potential for capital appreciation, whereas a Cash ISA offers safety but no growth potential.

For example, the Vanguard FTSE 100 ETF is up 12% in the past year. So if an investor had invested £20,000 12 months ago, they’d now have roughly £23,100. That’s a solid return. 

Global trade headaches

However, there’s no guarantee the blue-chip Footsie will do as well this year. It’s a truly global index, meaning many companies within it face the prospect of navigating a trade war. This could negatively impact earnings and send the FTSE 100 lower from its current level.

Take Diageo, which owns spirits brands like Johnnie Walker, Gordon’s, and Tanqueray. It would feel the impact of US tariffs on tequila imported from Mexico and whisky from Canada. Its brands in these categories — Don Julio, Casamigos, and Crown Royal — are among its most popular with American consumers. So this situation is far from ideal for the drinks giant.

Longer term though, I’m optimistic the FTSE 100 can keep steadily chugging higher. Large constituents like AstraZeneca, HSBC, Rolls-Royce, and data analytics firm RELX have very strong competitive positions and attractive long-term growth opportunities.

But this year’s trajectory is very unpredictable, meaning there is more to consider than just passive income when buying the index.

Aiming for a higher yield

Alternatively, an investor could decide to deploy their £20k into a portfolio of individual UK stocks that yield much higher than the average.

Admittedly, this adds risk because companies have individual challenges and they’re not assured to pay out dividends. But income investors are blessed because there are so many options across the UK market.

Investment firm M&G, for example, is sporting a mighty 9.6% yield for 2025, while insurer Legal & General is offering a 9% payout. If an investor puts £10k into each stock, they could expect £1,860 in passive income.

Of course, owning just two dividend stocks is not advisable. But given the smorgasbord of options available, I think it’s possible to build a diversified £20k Stocks and Shares ISA that yields 6.5%. That would generate £1,300 a year in passive income.

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Due to the power of compounding returns, even modest sums can eventually lead to a jaw-dropping end result.

Keeping things nice and simple

The Vanguard FTSE 100 UCITS ETF (LSE: VUKE) tracks the performance of the UK’s 100 largest companies. The list is rebalanced quarterly to reflect the rise and fall in the market value of companies.

In the latest reshuffle, struggling fashion house Burberry was replaced by insurer Hiscox. It’s a bit like teams getting relegated from and promoted to the Premier League.

Through a mixture of share price gains and dividends, the historical return of the FTSE 100 is just below 8%. There’s no guarantee that will continue in the years ahead. It could be more or less.

However, if this trend continues, then the return of the Vanguard FTSE 100 ETF should mirror this.

There are two versions of the fund for investors: distributive and accumulative. The first is where income is paid out, while the second automatically reinvests the dividends back into the fund.

What’s in it?

Here are the ETF’s top 10 holdings (as on 31 August).

These are all truly global firms. I personally hold four of them in my own portfolio (AstraZeneca, HSBC, British American Tobacco, and Diageo), and I’ve had my eye on data analytics giant RELX for ages.

One thing to bear in mind here is China. Beijing has just announced its biggest economic stimulus package since Covid. But if that fails to boost growth and the economy worsens, it could drag down FTSE 100 commodity stocks and affect the index’s performance.

Starting from scratch

Let’s assume I can afford to invest £99 a week — equivalent to £429 a month — into this ETF and it delivers the same returns in future. Here’s what would happen after 10, 20, and 30 years.

As we can see, the gains start out slow then accelerate as compounding really starts to take hold. In fact, the power of exponential returns is so great that the total would be nearly £3m after 50 years.

After a century, it’d be over £135m!

However, unless there’s a major advance in the science of longevity, I think 20-30 years is a more realistic time frame for most investors than a century.

Why settle for this?

This is with just £99 a week and average returns of 7.9%. But why just stick with the FTSE 100? The average historical returns of the S&P 500 — the 500 largest American companies — is more like 10.5%.

If I can build a portfolio of stocks, or a combination of different index trackers, that match this performance, this would make a massive difference to my return. So would adding in more money.

Let’s recalculate the numbers using a 10.5% average return and £150 a week invested.

In this scenario, the figure after 20 years wouldn’t be too far off the 30-year total in the first example. That’s the difference a couple of percentage points of investing returns can make over time!

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However, some investors prefer to try to beat the market instead. While the risks of buying individual stocks is greater, so are the potential rewards.

Let’s explore the FTSE 100’s return over 10 years and how it compares to an individual stock picking strategy.

FTSE 100 performance

There are multiple FTSE 100 tracker funds that investors can buy. In reality, the differences between these index funds are negligible bar slight variations in annual fee charges.

One popular, low-cost fund is the Vanguard FTSE 100 UCITS ETF (LSE:VUKE).

Back in July 2014, individual units in this tracker fund were trading for £30.36 each. With just over £5,000 to invest, I could have bought 165 units.

The market price has increased 17% in a decade to £35.56 today. Accordingly, my original investment would have appreciated to £5,867.40, provided I held those units for 10 years.

However, that’s not the whole story. Most of my gains would have come from dividends. Assuming I didn’t reinvest my cash payouts into more units, I could add £2,081.19 to the total, bringing my final sum to £7,948.59.

That’s an overall return of just under 59%.

Investing in individual stocks

That might sound like a reasonable gain, but it’s important to note that this figure is a nominal rather than real return. Accounting for inflation, the true number’s considerably lower.

In addition, there would have been an opportunity cost to leaving £5k in a FTSE 100 tracker fund for the past decade. I could have invested that sum in individual shares instead.

For instance, London Stock Exchange Group (LSE:LSEG) is one FTSE 100 stock that’s significantly outpaced the index in recent years.

Its share price has increased by around 430% over 10 years and the company’s offered a steady stream of dividends on top. That kind of outperformance shouldn’t be sniffed at.

Although past performance doesn’t guarantee future returns, I happen to think that London Stock Exchange Group is well-placed to be one of the leading FTSE 100 shares over the coming years. In my view, it’s a stock well worth considering.

A strategic partnership with Microsoft to build bespoke generative artificial intelligence (AI) models could be a lucrative source of growth. After all, the company owns an abundance of valuable data. Leveraging AI effectively should allow the business to enhance its customer offering considerably.

Granted, a lack of fresh UK IPOs could weigh on the firm’s performance. Plus, a forward price-to-earnings (P/E) ratio above 26 means the shares are more expensive than the FTSE 100 average.

Nonetheless, I believe the risk/reward profile looks attractive on balance.

The bottom line

While some stocks like London Stock Exchange Group have been top performers, other companies have trailed the FTSE 100 index. For example, Vodafone shares have lost nearly 63% of their value in the past decade.

More cautious investors who are concerned by volatility may wish to stick to tracker funds and that’s perfectly fine. But, there’s a nice middle ground too. Investors can consider buying both tracker funds and individual shares, which is exactly what I choose to do.

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The firm offered low-cost index funds, which championed a passive investment approach that tracks the market rather than trying to beat it.

Bogle’s indexing philosophy emphasises long-term investing, diversification, and keeping costs low. Most Foolish investors are down with all that, even if they prefer to pick individual stocks (like myself).

He once said: “The two greatest enemies of the equity fund investor are expenses and emotions.” Passive investing aims to eliminate high costs and remove emotions from the equation.

Here, I’ll look at an exchange-traded fund (ETF) that may be the simplest way to target a seven-figure portfolio.

Tracking the Footsie

Don’t look for the needle in the haystack. Just buy the haystack!

John Bogle

I’m talking about the Vanguard FTSE 100 UCITS ETF (LSE: VUKE). As the name indicates, it seeks to track the performance of the FTSE 100 index, which is comprised of large-cap stocks listed in the UK.

It therefore invests in all constituents of the Footsie in the same proportion. So, as of 30 April, the top five holdings were:

All of these blue-chip firms are well-established, profitable, and dish out regular dividends.

The ETF’s ongoing charge is just 0.09%.

Dividends are important

The FTSE 100 has risen 10.35% since the beginning of February and has been hitting record highs lately.

Still, many investors look at the historical share price returns of the FTSE 100 and are disappointed. And it has admittedly underperformed most other large indexes over the past 20 years or so.

However, such a view doesn’t take dividends into account (i.e., the total return). They don’t show up on most charts, yet they’re a crucial part of the overall picture.

The FTSE 100’s average yield is currently around 3.9%. That’s almost treble that offered by the S&P 500 (the main US index).

Over long periods, reinvested dividends can substantially boost returns. For example, the FTSE 100 has turned £1,000 invested in 1984 (when it was formed) into more than £22,000, with dividends reinvested.

That’s around 8% a year on average, which surpasses the returns typically seen from cash or bonds.

Now, this Vanguard ETF hasn’t been about since 1984. But from its inception in 2019, the version that reinvests dividends back into the fund (called accumulation) has turned every £10,000 invested into nearly £14,000.

Getting to a million

For our purposes, let’s assume that the FTSE 100 continues to return around 8% a year on average with dividends reinvested. Also, assume that I manage to invest £475 a month into this ETF.

In this scenario, my regular monthly investments would compound into £1m in just under 35 years. Incredible!

I should state that we don’t know what average returns the FTSE 100 will produce in future. It could be more or less. And dividends aren’t guaranteed, though investing in the whole index dramatically reduces this risk.

Plus, I haven’t factored in any platform fees here, while inflation will reduce future spending power.

Nevertheless, I expect FTSE 100 firms to be paying out dividends and creating value long into the future. So I reckon this ETF is a hassle-free way to consider aiming for a million pounds.

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The good news is that the ability to earn a growing dividend income is well within reach for the vast majority of savers.

Indeed, I can build a £54,159 dividend stream just by consistently investing £500 a month in a simple Vanguard exchange-traded fund (ETF). Here’s how.

The simple investment

The Vanguard FTSE 100 UCITS ETF (LSE:VUKE) tracks the FTSE 100‘s returns. So not only does it go up or down when the index does, but it also dishes out dividends to shareholders.

As at 31 March, the 10 biggest holdings were:

All these stocks pay dividends. Some of their yields are quite modest (that of data analytics firm RELX is 1.78%), while others are much meatier (HSBC yields 7.52%).

Collectively though, Footsie payouts add up and give the ETF a dividend yield of 3.84%.

This is unlike the US, where indexes are dominated by tech giants like Alphabet (nee Google) and Amazon that have never paid dividends. The average yield of the S&P 500 is a paltry 1.31%.

Dividend diversification

While dividends aren’t guaranteed, investors can benefit from broad exposure to the FTSE 100. Broad exposure reduces the impact of individual companies or whole sectors cutting their payouts.

For example, UK housebuilders have been taking the axe to their dividends over the past year due to higher interest rates and a slowdown in the property market. Offsetting this, however, have been banks, which have hiked their own payouts after benefitting from higher interest income.

Another key strength of the UK blue-chip index is that it is truly global. In fact, over 80% of the sales of FTSE 100 companies now come from outside the UK, according to London Stock Exchange Group.

This diversification is an important feature of the ETF. Another is low fees, with the ongoing charge just 0.09%.

Investing £500 per month

Over the last 10 years, the ETF has produced a cumulative return of 75% (share price gains and dividends).

Now, this is perhaps one criticism I’d have here. It tracks the FTSE 100, which has long underperformed other major global indexes on a share price return basis. This underperformance could continue.

However, for the purposes of solid and dependable income, no other index comes close.

So let’s take that 7.5% a year as our average return. If I put in £500 every month and reinvested my dividends, here’s how the portfolio value could build up.

So, if I consistently invested into this ETF for 40 years, I could end up with annual passive income worth just over £54,000 (excluding any platform fees).

In other words, I could stop reinvesting dividends and start spending them! Or simply enjoy the nest egg I’d built up.

Of course, this is based on the fund’s current 3.84% yield, which in reality will fluctuate throughout this time. And inflation will mean £54k won’t have the same purchasing power in four decades as it does now.

Nevertheless, this Vanguard ETF is arguably the easiest option for building a sizeable future passive income stream. It practically takes no effort.

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While the FTSE 100 woefully underperformed the S&P 500 over the past decade, in terms of capital growth, it’s historically offered a much higher dividend yield. For investors who prioritise earning regular cash payouts from the stock market, the Footsie might be the better choice.

So how much passive income could I earn from a £10k investment? What considerations should investors bear in mind? And are there better opportunities in individual shares?

Let’s explore…

Tracking the index

A good way to invest in the FTSE 100 is to buy units in an exchange-traded fund (ETF) that tracks the index’s performance. The Vanguard FTSE 100 UCITS ETF (LSE:VUKE) is one example.

Currently, this ETF offers a 3.82% yield and each individual unit trades for £33.13. Since it mirrors the Footsie, the fund’s holdings are concentrated in large-cap UK shares featuring in the index.

With a little over £10k to invest, investors could purchase 302 units today. At the current yield, that would produce more than £382 in annual passive income.

Risk and reward

Although dividend payments aren’t guaranteed, investors would benefit from diversification via broad exposure to the FTSE 100. This reduces potential risks from individual companies cutting their payouts.

Plus, it’s worth noting how attractive the FTSE 100 is right now from a passive income perspective. For context, another Vanguard fund, the FTSE All-World High Dividend Yield UCITS ETF (VHYL), offers global exposure to stocks “that pay dividends that are generally higher than average“. Yet its 3.31% yield doesn’t beat the Footsie!

That said, investors seeking growth are likely to be disappointed. Vanguard’s FTSE 100 ETF has only grown 6% over the past five years, excluding dividends.

There’s a cautionary tale in the fact that the best performing FTSE 100 stock last year was Rolls-Royce, which delivered a remarkable 221% share price gain. The British aerospace giant doesn’t currently issue dividends.

A stock to consider

While broad diversification’s important, there are also potentially significant benefits in sifting through the index to identify individual high-yield dividend stocks.

One company I invest in is housebuilder Taylor Wimpey (LSE:TW.), which offers a juicy 6.46% yield. That’s considerably higher than the FTSE 100 average.

Macroeconomic conditions appear to be improving for Taylor Wimpey shares. According to Nationwide’s index, January UK house prices saw their strongest monthly growth in a year, advancing 0.7%.

Furthermore, with interest rate cuts expected later in 2024, mortgage rates may continue to fall. This could alleviate affordability pressures that suppressed housing market activity in 2023.

However, forward dividend cover isn’t as robust as I’d like at just one times earnings. This figure’s well below the two times multiple that generally indicates a wide margin of safety.

Nonetheless, I’m a fan of the dividend policy. It’s linked to assets rather than earnings. Taylor Wimpey aims to “return c. 7.5% of net assets to shareholders annually, which will be at least £250m per annum”.

For investors keen to look beyond the FTSE 100 index at individual dividend shares, I think Taylor Wimpey deserves consideration.

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Vanguard’s low-cost FTSE 100 UCITS ETF (LSE:VUKE), which mirrors the index’s performance, is a good example of a passive fund I could invest in. Currently, it offers a 4.28% dividend yield and distributions are paid quarterly.

So if I aimed to replace my salary with passive income from the UK lead index, how much would I need to invest in Vanguard’s exchange-traded fund (ETF)? Let’s crunch the numbers.

Dividends

The FTSE 100 is a global leader among stock market indexes for dividends. That’s because it has a high concentration of well-established businesses with long track records of profitability.

Insurers, miners, housebuilders, telecoms giants, tobacco companies and other firms form the ranks of London’s leading benchmark. There’s a notable absence of more speculative growth stocks, such as tech companies.

To illustrate the point, here are the top 10 yielding Footsie shares at present.

By investing in Vanguard’s FTSE 100 UCITS ETF, I’d gain exposure to these companies as well as the remaining 90 that complete the index.

Imagine I wanted to target £30,000 in annual passive income. As I write, the ETF currently trades for £33.49 per share.

At today’s yield, that means I’d need to buy 20,930 shares for a total price of £700,945.70.

Passive vs active investing

That brings me to the relative merits of passive investing against active investing. Although the Footsie has an impressive yield compared to other indexes, it’s possible to beat this by pursuing a more active approach.

If my portfolio had greater exposure to high-yield dividend stocks like those in the table above, I might earn more passive income for each pound I invested. For instance, if I secured a 6% yield on my stocks, I’d only need to have £500,000 invested to generate £30k a year — that’s over £200k less than I’d need by passively following the FTSE 100!

By the same token, if I made good stock picks with potential for big share price gains, I could secure higher returns. For example, one FTSE 100 stock that has outperformed the index over five years is pharmaceutical titan AstraZeneca, as the chart below demonstrates.

That said, there are higher risks involved when it comes to buying individual stocks. Dividends can be cut or suspended, especially if yields reach unsustainable levels. Similarly, just because stocks like AstraZeneca have outperformed over recent years, there’s no guarantee they will continue to do so.

Passive investing mitigates these risks to some extent via diversification. By gaining exposure to more stocks, I’m less reliant on any single company for passive income, or capital appreciation.

I don’t think an ‘all or nothing’ approach is required. My own portfolio contains a mix of passive tracker funds and individual stocks, in line with my risk appetite.

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One of the most popular of these trackers in the UK is the Vanguard FTSE 100 Index Unit Trust (LSE: VUKE). This ETF can be bought and sold just like any other regular stock.

But how much could it pay me in dividends if I invested £10,000 in it today?

What’s in it?

First, before looking at the potential income, here are the top 10 holdings, as at 30 April.

One of the things I immediately like about this list is its diversity. There are well-established miners, giants in energy and pharmaceuticals, and diversified consumer staples companies here.

Yes, one possible criticism is that it doesn’t provide much technology exposure — but then tech stocks aren’t known for paying generous dividends.

This ETF currently yields 3.84%. That means I’d expect £384 annually from a £10,000 investment.

While no dividends are ever totally guaranteed, the payment here is sourced from all the Footsie’s dividend-paying stocks. In theory, that should make the income safer, particularly as most of the constituent companies sell products and services right across the globe.

Less appealing

Now, obviously central banks have been aggressively increasing base interest rates to try and tame stubbornly high inflation. As a result, investors can find higher yields elsewhere today.

For example, the UK 10-year gilt (a fixed-interest bond issued by the Treasury) is currently yielding 4.26%. So a 3.8% cash yield doesn’t sound particularly impressive in comparison.

So why should I bother?

Well, investing in a FTSE 100 tracker could also generate additional returns through share price appreciation. However, this isn’t guaranteed, as we can see by the fund’s poor -2.75% five-year return (excluding dividends).

Different paths

I think there are two alternative strategies investors could pursue here.

The first is buying a FTSE 100 tracker than reinvests the dividend payments back into the fund rather than paying them out. This tends to generate far superior returns, as can be seen below.

A £10,000 investment made a decade ago would now be worth over £16,000 as a result of reinvested dividends.

Of course, the drawback here would be the sacrifice of passive income today for potentially greater returns in the future.

Therefore, a second strategy could be to target those individual FTSE 100 dividend stocks that pay far higher yields than the average. And currently there are a good few of these in the Footsie.

One is investment management firm M&G, which currently yields a massive 9.6%. Meanwhile, British American Tobacco and Lloyds are yielding 8.6% and 5.3%, respectively. And insurance groups Phoenix and Legal & General both have cash yields above 8%.

So, if I spread my £10,000 between ultra-high-yield stocks such as these, then my portfolio could be generating passive income far above what I could achieve through bonds or index trackers.

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It has managed to stay level since the start of the year, while its counterpart across the Atlantic, the S&P 500, has seen a decline of 10%. The reason behind the two indexes’ different fortunes could be down to their respective constituents.

IPOs don’t like playing FTSE

For the last couple of years, the FTSE 100 has consistently underperformed its US equivalent, at least until recently. The reason for this was a lack of tech and growth companies in the index, as many of these firms opt to list in the US. This is due to the more stringent listing requirements for companies to list on the London Stock Exchange. These include:

• Minimum market capitalisation of £700,000.
• Minimum 25% of shares in public hands.
• Three year trading record required.
• Sponsors needed for new applicants and significant transactions.
• Prior shareholder approval required for significant transactions.

London has historically sought to limit the influence of individual executives, which has deterred many tech companies that are often founder-led. The additional stamp duty to purchase shares also stifles trading volume, presenting another disadvantage for stocks.

No tech, no problem

The FTSE reflects outsized weightings in energy, commodities, and financials. In fact, these three industries account for almost half of the UK’s main index. The S&P, on the other hand, only has 16% of its constituents in these three matured industries.

Due to sky high inflation, the US Federal Reserve has had to hike interest rates. Rising interest rates are normally conducted to slow consumer spending down from higher borrowing costs. So, how has this affected the S&P 500? Given that most technology and growth stocks are valued based on potential future cash flows, a slowdown in overall consumer spending can take a huge chunk off its valuation. This has been evident as tech stocks such as Meta have seen its share price decline 45% from its all-time high.

Simultaneously, FTSE-listed stocks have enjoyed immunity from the weakness of their tech peers. For one, energy stocks such as Shell and BP have enjoyed the tailwinds from rising oil prices. Moreover, high commodity prices in iron ore, copper, and aluminium have also held the index up. Financial stocks, including banks, have also benefited from rising interest rates. This trend is expected to continue in the short to medium term. The outlook for commodities, especially energy and materials, remains solid as the global economy continues to recover from the pandemic.

The million pound question

Is investing in a FTSE 100 fund a good investment for my portfolio then? Well, the British stock market is currently one of the cheapest in the world. It’s trading at a price-to-earnings (P/E) ratio of 14, far lower than the S&P 500’s 16. It also has a projected earnings yield of 13% over the next year, which is forecasted to be twice as much as the S&P.

On that basis, I’m keen to invest in the FTSE 100 for my portfolio through index funds like Vanguard FTSE 100 UCITS ETF (VUKE). Nonetheless, I also see a buying opportunity for the S&P 500, given its incredible track record of producing outstanding returns.

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