Building a diversified portfolio allows investors to spread risk as well as target market-beating returns. Someone who invested £20k equally five years ago in this particular FTSE 100 share and exchange-traded fund (ETF), for instance, would have more than doubled their money to £45,493.
I think these London-listed stocks remain top investments to consider. Here’s why.
A top fund
A blend of soaring tech earnings, sustained monetary support, and a rebounding US economy has driven the S&P 500 through the roof since 2020. Over the past five years, the index-linked fund iShares Core S&P 500 ETF (LSE:CSPX) has delivered an average annual return of 14.8%.
Admittedly there’s more risk to buying US-focused funds like this today. This is because growth-sapping and inflation-stoking trade tariffs introduced by President Trump could be coming.
Intelligence provider S&P Global thinks US tariffs on Canada and Mexico alone will boost consumer price inflation (CPI) by 0.5% to 0.7%. That’s assuming said tariffs persisted through 2025.
S&P also thinks US real GDP over the next year will be 0.6% lower if new trade taxes are introduced, with the Federal Reserve pausing planned rate cuts earlier than anticipated.
Yet despite this threat, I’m still confident about the S&P 500 looking ahead. While past performance is not always a reliable indicator, the index has been resilient despite past macroeconomic and geopolitical turmoil.
Since February 1995, the S&P 500 has appreciated by a whopping 1,160%. I believe it’ll continue soaring over the next 30 years too.
For one, it still provides significant exposure to growth themes like increased digitalisation, the growing green economy, rising healthcare demand, and the financial services boom. A substantial weighting of multinational large-cap shares also makes it less reliant on a strong US economy to drive earnings than a mid-cap tracker is.
Finally, the S&P 500’s unique mix of innovation champions and established industry leaders provides growth potential as well as resilience over the long term.
Game on
Investing in individual shares doesn’t provide security through diversification like an ETF. But it can also deliver superior returns if stock pickers choose wisely.
Take Games Workshop (LSE:GAW), for example. Since 2020, the tabletop gaming specialist has delivered an impressive average annual return of 18.3% as sales have kept soaring.
Since it opened its first shop in the late ’70s, the fantasy wargaming hobby has become a multi-billion-pound industry. And through its Warhammer line of products — which it has been cultivating for almost 40 years — Games Workshop has become the undisputed market leader.
This is reflected in the premium prices of its models and other paraphernalia, and consequently its enormous profit margins. Core gross margin was 67.5% in the six months to 1 December.
Can Games Workshop continue its stunning share price ascent, though? Some analysts have concerns, reflecting less scope for earnings growth as what was a niche hobby has become more mainstream.
I have no such concerns, however. For one thing, the business continues to rapidly expand its store network across the globe. It’s also taking steps to supercharge its royalty revenues, as illustrated by its blockbuster TV and film deal with Amazon last year.
Revenues growth may slow during economic downturns. Still, over the long term, I’m expecting Games Workshop to keep delivering.
