If I’d put £20,000 into the FTSE 100 at the start of 2024, here’s what I’d have now

This investor takes a look at the stark difference in performance between the FTSE 100 and S&P 500 indexes so far this year.

| More on:

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Some Stocks and Shares ISA investors choose to allocate their entire £20k annual limit to the FTSE 100. With its reputation for stability and an 8% average long-term return, this makes sense.

So, what if I’d done the same at the start of 2024? How much would I have so far this year?

The return

The iShares Core FTSE 100 UCITS ETF (LSE: ISF) is one of the most popular tracker funds in the UK. This exchange-traded fund (ETF) mimics the performance of the 100 largest firms on the London Stock Exchange.

Since the turn of the year, this fund is up 6.4%. So I’d have £21,280 on paper. Not bad.

However, the Footsie is also known for its generous dividends. If we include those, the total return is 9.6%.

My hypothetical return year to date would be around £21,920.

How about the S&P 500?

Is that any good? I’d say it’s not bad, considering it’s above the long-term historical average.

Of course, the year isn’t over yet, so there’s time for it to pull back (or go higher). It’s a coin toss which way it’ll head, with optimism on interest rate cuts being tempered by rising geopolitical tensions and worries around a US recession.

One thing to note about the FTSE 100 is that it tends to lag the S&P 500. Year to date, the US’s blue-chip index is up around 21%, including dividends, largely due to surging artificial intelligence stocks.

Clearly, the S&P 500 is winning hands down again!

Valuation concerns

I don’t invest in index trackers. Instead, I pick individual US and UK shares to try and beat the market. While this approach is admittedly a bit riskier, it can also be more rewarding.

Right now though, US shares are highly valued. Indeed, the average S&P 500 stock trades for a price-to-earnings (P/E) multiple of about 28. This compares to a P/E ratio of just 13.5 for the FTSE 100.

Moreover, the S&P 500 offers a paltry 1.3% dividend yield versus a Footsie average of 3.5%.

Given this situation, I’d be very careful buying US-listed stocks right now. Many of my favourite holdings, including Shopify, Ferrari, and Intuitive Surgical, look overvalued.

This doesn’t mean I’ll sell them. But I won’t be investing more money at today’s pricey valuations.

A discounted hedge fund

However, a possible compromise might be found in Pershing Square Holdings (LSE: PSH). This is a FTSE 100-listed investment trust that holds predominantly US shares.

As of August, Pershing Square’s top positions were Universal Music GroupHilton, Alphabet, and Chipotle Mexican Grill. These are top-notch companies with significant competitive advantages.

However, the portfolio only contains nine stocks! This high concentration makes it riskier than most other investment trusts.

The trust acts as an investment vehicle to access the high-conviction strategies of Bill Ackman’s hedge fund (Pershing Square Capital Management). He has a stellar track record, which has helped the FTSE 100 stock surge 137% over the past five years.

Yet the shares are trading at a huge 26% discount to the fund’s net asset value (NAV). In other words, I can invest in the stocks in Pershing’s portfolio for 26% less than their current market value, indicating great potential value.

I’d consider buying more shares with spare cash.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Ben McPoland has positions in Ferrari, Intuitive Surgical, Pershing Square, and Shopify. The Motley Fool UK has recommended Alphabet, Intuitive Surgical, and Shopify. 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.

More on Investing Articles

Person holding magnifying glass over important document, reading the small print
Investing Articles

Just released: our top 3 small-cap stocks to consider buying in October [PREMIUM PICKS]

Small-cap shares tend to be more volatile than larger companies, so we suggest investors should look to build up a…

Read more »

Investing Articles

How I’d use an empty Stocks and Shares ISA to aim for a £1,000 monthly passive income

Here's how using a Stocks and Shares ISA really could help those of us who plan to invest for an…

Read more »

Investing Articles

This FTSE stock is up 20% and set for its best day ever! Time to buy?

This Fool takes a look at the half-year results from Burberry (LON:BRBY) to see if the struggling FTSE stock might…

Read more »

Investing Articles

This latest FTSE 100 dip could be an unmissable opportunity to pick up cut-price stocks

The FTSE 100 has pulled back with the government’s policy choices creating some negative sentiment. But this gives us a…

Read more »

A young woman sitting on a couch looking at a book in a quiet library space.
Investing Articles

As the WH Smith share price falls 4% on annual results, is it still worth considering?

WH Smith took a hit after this morning’s results left shareholders unimpressed. With the share price down 4%, Mark Hartley…

Read more »

Investing Articles

The Aviva share price just jumped 4.5% but still yields 7.02%! Time to buy?

A positive set of results has put fresh life into the Aviva share price. Harvey Jones says it offers bags…

Read more »

Investing Articles

Can a €500m buyback kickstart the Vodafone share price?

The Vodafone share price has been a loser for investors in recent years, and the dividend has been cut. We…

Read more »

Frustrated young white male looking disconsolate while sat on his sofa holding a beer
Growth Shares

3 mistakes I now avoid when choosing which growth stocks to buy

Jon Smith runs through some of the lessons he's learnt the hard way over the years about what to look…

Read more »