Lessons from the FTSE at 40
As the FTSE 100 turned 40 on 3 January 2024, we look at how it compared to its predecessor and the lessons learned from four decades of growth versus inflation.
As the FTSE 100 turned 40 on 3 January 2024, we look at how it compared to its predecessor and the lessons learned from four decades of growth versus inflation.
Source: Google Finance
The Financial Times Stock Exchange (FTSE) 100 Index, to use the Footsie’s full name, has celebrated its 40th anniversary. It is a significant milestone and an opportunity to take stock of the index’s history and position.
The UK’s benchmark stock market index was launched in 1984 by the London Stock Exchange, designed as a modern successor to the FT30 Ordinary Share Index produced by the Financial Times. The FT30 was a product of a pre-computer era and once calculated using a slide rule. There are other starker comparisons with the 100-share FTSE 100:
From its initial launch value of 1,000, the FTSE100 has climbed to 7,721.52 by its 41st year on 3 January 2024. That equates to an annual growth rate of 5.2%. Inflation over the same period, as measured by the Retail Prices Index (RPI – the CPI does not go back beyond 1988) averaged about 3.7% a year.
Like most indices, the FTSE100 measures only capital values and does not include dividends. When dividends are considered, the total return on the FTSE100 rises to 8.2%, an annual 4.5% outperformance of inflation. Dividends are still a key factor in the returns from the FTSE100 today, with the Index offering a dividend yield of close to 4%.
If there is one lesson from the FTSE100’s legacy of the past four decades, it is that next time you see or hear its performance being quoted, check whether dividends have been taken into account.
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