01925 937 499

Loftus Stowe News

Home»Uncategorized»If you’d invested £1k in the FTSE 100 20 years ago, this is how much it would be worth today

If you’d invested £1k in the FTSE 100 20 years ago, this is how much it would be worth today

Investing in the FTSE 100 has been a popular choice for a wide range of people over the years. Its performance since inception in 1984 has been strong, with it delivering an annualised total return of around 9% since then.

However, its performance over the past 20 years has been relatively disappointing. In fact, a 1,000 investment at the turn of the century would now be worth around 2,300. That works out as an annualised return of just over 4%, which is less than half of the indexs annual returns since inception.

Heres why that figure is so low, and why investors in the FTSE 100 could enjoy significantly higher gains in the coming years.

High valuation

Twenty years ago, the FTSE 100 was experiencing a strong bull market which was being fuelled by investor interest in the technology sector. Companies that did not even have revenue were in high demand due to the potential for the internet to fundamentally change the way that business, and the world, operated.

As such, the FTSE 100 and the wider stock market were grossly overvalued. This meant that buying shares 20 years ago would equate to investors entering the market at an unfavourable time. As a result, subsequent returns have been disappointing.

A challenging period

Additionally, the FTSE 100 has experienced a major financial crisis in the past two decades alongside the unravelling of the tech bubble. The global financial crisis caused fear among investors, consumers and businesses that produced a halving of the indexs price level.

Although the FTSE 100 has subsequently recovered, it has been an uncertain period for the index that has left it trading on a favourable valuation despite experiencing a decade-long bull market. For example, the FTSE 100 currently has a dividend yield of around 4.3%, while many of its members trade on valuations that are significantly below their long-term averages.

Growth potential

This could mean that investing in FTSE 100 shares today yields higher returns than it has done over the past 20 years. Certainly, there are risks facing the world economy that could cause the index to experience a volatile 2020. However, in many cases, those risks have been priced-in by investors so that the risk/reward opportunity from the index is relatively favourable.

Therefore, while a 130% total return over the past two decades is a disappointment, history shows that the FTSE 100 can deliver superior returns. It surged from 1,000 points to almost 7,000 points in just over 15 years following its inception in 1984. While a similar rate of growth may not necessarily be achievable in the next two decades, the wide margin of safety offered by the index suggests that now could be the right time to buy a range of large-cap shares to boost your long-term financial prospects.

Theres a double agent hiding in the FTSE

We recommend you buy it!

You can now read our new stock presentation.

It contains details of a UK-listed company our Motley Fool UK analysts are extremely enthusiastic about.

They think its offering an incredible opportunity to grow your wealth over the long term at its current price regardless of what happens in the wider market.

Thats why theyre referring to it as the FTSEs double agent.

Because they believe its working both with the market And against it.

To find out why we think you should add it to your portfolio today

Click here to read our presentation.

Leave a Comment


Femi Ogunshakin Managing Director
I hope you've enjoyed visiting our website. Let me know if there’s anything either me or one of my colleagues can do to help by completing the form below and clicking the send button.