Is the FTSE 100 a good investment?

Investors in the FTSE 100 have broadly escaped the market carnage over the last year.

At the time of writing the FTSE 100 is up 1.79% over the last 12 months.

This compares favourably to its global peers. Over the same timescale the S&P 500 is down 15.32%, the Nasdaq is down 29.7%, Nikkei 225 is down 6.14%, CSI 300 is down 23.27%, DAX is down 11.05% and the CAC 40 is down 6.75%.

Does this make the FTSE 100 a good investment? Not necessarily. Let’s take a look at the longer-term performance: 

5 Years Performance

FTSE 100 -0.28%

S&P 500 +52.37%

Nasdaq +61.79%

Nikkei 225 +23.92%

CSI 300 -8.16%

DAX +9.79%

CAC 40 +22.93%

Figures correct as at 21/11/2022. Source www.selectwealth.co.uk

As you can see, the FTSE 100 has generally lagged other worldwide markets. Having all of your money invested in one country inevitably brings higher risk, as the recent ‘mini-budget’ demonstrated.

Select Wealth Managers state “Due to the FTSE’s large exposure to the UK, investors have minimal exposure to ‘New Economy’ tech companies, whilst having large exposure to ‘Old Economy’ stocks such as Shell, BP and British American Tobacco”.

In the last year we have had a Tech sell-off whereas Shell, BP and British American Tobacco have all seen their share prices surge.

Again, if we take a longer-term view, things look very different. Some Tech companies have seen huge share price gains. Take Apple, they currently have a market cap of circa $2.5 trillion.

Shell – the largest company in the FTSE 100 – currently has a market cap of about £171 billion ($203 billion). In fact, the market cap of Apple is higher than all UK listed companies combined.

So, is the FTSE 100 a good investment? Ultimately only time will tell. Having an investment portfolio split between different assets, sectors and countries can help to lower the volatility and avoid having ‘all your eggs in one basket’.

What this will look like would depend on an individual’s risk level, investment objectives and time horizon.

As an example, for a UK based investor who is happy to take a ‘Balanced’ approach to investing and was looking at a horizon of 5+ years, a starting point might be:

Cash – Money Market 9%

UK Corporate Bonds 17%

Global (Ex-UK) Fixed Income 9%

Global Property 5%

UK Equity 15%

Europe (Ex- UK) Equity 6%

North America Equity 18%

Japan Equity 5%

Developed Pacific (Ex-Japan) Equity 9%

Emerging Market Equity 7%

This information is based on our current understanding and is subject to change without notice. Nothing in this document constitutes financial, investment or other professional advice and relevant advice should be sought prior to any financial or investment decision being made.

The value of investments and the income from them can go down as well as up and you may not get back the amount originally invested. 

HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen.