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Already this year, the FTSE 100 index of leading British shares has hit a new all-time high. It has also broken the 10,000 mark for the first time ever.
Over the past five years, the FTSE 100 has grown in value by 51%.
So, if someone was to put in £1,000 today, what might they be sitting on a year from now?
What drives stock market returns
The answer to that question depends on three elements. One is share price movements and I’ll come back to that in a moment.
The second is dividends. At the moment, the FTSE 100 offers a dividend yield of 2.9%. So someone who puts in £1,000 ought to earn around £29 in the next year from dividends.
Dividends are never guaranteed so the actual amount could be higher or lower, but as a broad indication of what to expect I think the current FTSE 100 yield is a useful starting point.
The third factor driving returns is stockbroking fees, costs and charges. These can seem small but eat into returns even on a one-year basis, let alone over the long term.
So it makes sense to hunt for the right share dealing account, Stocks and Shares ISA or trading app.
Digging into price movements
The Footsie’s 51% growth over the past five years means that £1,000 invested back then ought to be worth around £1,510 even before dividends are taken into account. But how might the index do in the coming 12 months?
It has done well in the first days of 2026. Last year’s performance (+22%) demonstrated that the index can do well even when the economy is sluggish. Partly that’s because the FTSE 100 comprises companies listed in London but a significant part of their earnings are generated overseas.
What might 2026 bring?
I think a repeat of last year’s performance over the next 12 months is unlikely given a weak UK economy and geopolitical uncertainty. But if it happened, £1,000 could be worth over £1,200 in a year.
More optimistically, what if geopolitical concerns recede and the world steps into growth mode? If that happens, perhaps the FTSE 100 could do even better than it did last year.
However, at an all-time high amid a fairly fragile economy, I also see a risk the flagship index could fall. That could shrink the value of £1,000 invested now.
I’m buying FTSE 100 shares
Personally,though, I am not ‘buying the index’ by investing in a FTSE 100 tracker fund. Instead, I own individual FTSE 100 shares that I think look like good value.
One I have been buying in recent months is high street bakery chain Greggs (LSE: GRG), a well-known business that I find fairly simple to understand.
The share price has tumbled 21% over the past year. Fears of slowing growth rates help explain that, though I still see substantial growth opportunities.
Wage inflation is a risk to profitability.
But with its strong brand, proven business model, thousands of shops, economies of scale and some unique products, I think Greggs has a long-term winning formula.
Hopefully that will help the share price. Selling for just 12 times earnings, the FTSE 100 share looks cheap to me given its business potential.
