Image source: Getty Images
The first thing many British investors ask when starting is: how much money can be made from FTSE shares? Of course, actual results differ wildly from one investor to the next. But using the average returns of an index tracker can help give us some idea.
For example, the FTSE All-Share has grown almost 60% in the past 10 years. So an investor who put £5,000 in a FTSE All-share index tracker a decade ago would have around £8,000 today.
When accounting for inflation, that would equate to less than £2,000 in profit over 10 years. Not exactly encouraging.
But that doesn’t mean there aren’t excellent returns to be made on the UK stock market. With a bit of research, it’s possible to identify stocks that are likely to outperform the wider market.
Take, for example, City of London Investment Trust, a managed fund that attempts to outperform the FTSE 100. It has returned almost 100% in the same period, with dividends included.
But investors who know what to look for could achieve even greater results. It’s not uncommon for savvy UK investors to achieve 10% returns on average a year, equating to around 160% over 10 years.
It’s all about picking the right stocks.
What to look for in stocks
When researching a company, it’s important to look at things like earnings, dividend yields, share-price performance, broker ratings and valuation metrics.
Steady dividends are a good sign of stable earnings and cash flow. Meanwhile, the share price can reveal how much the wider market values the company and its growth expectations.
Analyst views allow an insight into what experts think, and valuation metrics help us understand if the price is right. For example, the price-to-earnings (P/E) ratio compares a company’s earnings to what investors are willing to pay per share.
Most of this data’s disclosed via company reports and trading updates, which are publicly available.
Invest in what you know
It’s also common practice to invest in companies you understand. For example, I grew up in Africa and have a background in telecoms, so I’m familiar with Airtel Africa (LSE: AAF).
Operating across several countries in Africa, the company aims to harness the huge growth potential of the region. And recent results show it’s done well. Its latest quarterly results revealed a huge 620% increase in earnings year-on-year, beating expectations by double.
The share price reflects this growth, with the company now the second-best performing stock on the FTSE 100 in 2025.
But I’m not ignorant of the risks either. Many of Airtel Africa’s markets (for example Nigeria) are subject to currency devaluation and economic instability. In previous periods, this has resulted in large foreign-exchange losses.
This shows how it’s just as important to research potential risks as it is results.
What this means for investors
Broad index trackers like the FTSE All-Share are stable and reliable but deliver minimal returns — especially when accounting for inflation. Actively selecting individual stocks can often deliver greater returns, the caveat being that these returns come with higher risk.
To reduce risk, it’s worth considering a growth-oriented stock like Airtel Africa while balancing it with more defensive holdings, such as retail or utility shares. With sufficient diversification across several sectors and regions, an investor can aim for decent returns without significant risk.
