Here’s how much money I’d make if I invested £10k into a FTSE All-Share tracker fund back in 2014. While the FTSE 100 steals most of the headlines, the FTSE All-Share index is a popular alternative. Apart from providing significantly more diversification to a portfolio, the index exposes investors to a wider range of opportunities. But has it actually been a better performer?
Let’s crunch the numbers.
How have FTSE trackers performed?
As per the latest data from FTSE Russell, the FTSE All-Share index has actually delivered slightly higher returns than the FTSE 100 over the last decade. The UK’s flagship index has delivered a total return of 67.9% since 2014. By comparison, the FTSE All-Share comes in at 68.2%.
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That means £10,000 invested a decade ago would now be worth £16,820. If this performance were to continue for another 10 years, this investment would grow to £28,650 without any further investment.
Obviously, almost tripping the starting capital is nothing to scoff at. But breaking these returns down to an annualised basis reveals that the FTSE All-Share has only delivered a meagre average of 5.3% each year. And that’s after including dividends.
I think those are some pretty underwhelming results, and they are notably slower than the long-term historical average of 8% to 10%.
A better way to invest?
Past performance is not a good indicator of future returns. And it’s entirely possible for the FTSE All-share, along with other indices, to bounce back and dominate. However, even if performance doubled back to its superior historical gains, a 10% return still pales in comparison to the success some individual stocks have achieved.
Take Kainos Group (LSE:KNOS) as an example. Since going public just under a decade ago, the digitalisation specialist has surged. Even after tumbling in the recent stock market correction, shares are still up 481%. On an annualised basis, that’s the equivalent of 21.6% before even accounting for dividends.
At this rate, £10,000 would have grown to be worth over £85,000. Needless to say, that’s a massive improvement. Obviously, I’m cherry-picking here. There have been plenty of other stocks that haven’t even come close to Kainos’ stellar performance, let alone keep up with FTSE indices.
This perfectly highlights two facts about stock picking. First, it comes with higher risk compared to passive index investing strategies. And second, picking individual stocks opens the door to potentially huge returns. And it’s how legendary investors like Warren Buffett have amassed staggering amounts of wealth.
A top stock to buy now?
As a shareholder of Kainos, I remain optimistic about its long-term potential. The firm is in the middle of diversifying its business model to access new markets. And while there have been a few transitional pains, the long awaited results are starting to appear on the income statement.
This may prove to be enough to maintain its long-term momentum. However, the company still has plenty of challenges to overcome. It’s still exposed to customer concentration risk, and it’s putting a lot of weight behind its Workday partnership that could become compromised if relationships sour.
Nevertheless, with an impressive track record, I remain a long-term bull. And in my opinion, it’s an investment I’d choose over a FTSE All-Share tracker fund in 2024.
