If I had invested £10k in the FTSE 100 25 years ago, this is what I would have today

The FTSE 100 is the UK's main stock market index. What would a £10,000 investment in it be worth as of October 1999?

Drumroll, please… £13,298. That's based on a 32.98% return.

I would be very disappointed in that.

Why has this happened?

It may be tempting to blame this on the UK economy, but this is still growing faster than the FTSE 100. Its GDP was $1.69trn in 1999 and recently $3.1trn by the end of 2022.

In addition, the FTSE 250 performed much better, up 272.43%.

One explanation is that the index does not contain world-class innovative companies. Most of the companies in it are in the financial services, banking, oil, mining, or support sectors. These are not exactly fast growing or exciting companies and it can be the reason that investors are not interested in investing in them.

How have the US stock markets fared?

If we turn our attention to the other side of the Atlantic, we can see that the US stock market indexes have done much better in the last 25 years.

I S&P 500 increased by 333.53% during that period. So, my £10,000 would have made me £43,353 in the S&P 500. Very attractive!

Moreover, it is tech-heavy The Nasdaq-100 increased by 693.19%. I would have made £79,319 from my own money.

The reason for this inversely relates to the position of UK stocks. Companies in America are very exciting and show very strong growth. Some of the biggest and most innovative companies in the world are US companies. Consider the popularity of an apple, Teslaagain Nvidia to name a few.

It should be noted that profits and foreign exchange affect the comparison of indicators of different countries. For example, the Footsie generally offers a higher dividend yield than the S&P 500. In addition, different countries receive tax benefits differently, which affects their appeal. These factors can contribute to the overall return on investment. However, for the sake of simplicity, in this article I only focus on the importance of the indicators discussed.

Just because US stocks have outperformed UK stocks in the past doesn't mean this will continue.

British companies on Footsie are starting to look more exciting than ever.

Rolls-Royce (LSE:RR) is a good example of this. Since the beginning of 2023, its shares have increased by 469.74%.

This is no reason either. The company has been experiencing strong growth for a while now. For example, it nearly doubled its annual pre-tax profit to £1.04bn in the first half of 2024.

It also participates in exciting and innovative projects. It was recently selected by the Czech Republic's state utility company for its small modular reactor (SMR). The SMR market is expected to be worth £295bn by 2043. This is a good growth prospect, which could drive the company's revenue for years to come.

That means its shares are overvalued, with a price-to-earnings (P/E) ratio of 31. Therefore, its shares may fall from bad news. Because of fears of a US recession, this is a real possibility.

However, overall, the company is a good example of an FTSE 100 trending stock in the right direction. That is why I hope that the index will have better luck in the coming years.