This week I did something that might raise a few eyebrows: I started a dedicated FTSE 100 tracker position. Yes, the FTSE 100 — the index everyone loves to complain about. 'It's full of banks and oil companies.' 'It's gone nowhere for years.' 'The UK is a backwater.' I've heard it all.
Here's why I'm adding it anyway.
First, the obvious: the dividend yield on the FTSE 100 is around 3.5-4%, which is meaningfully higher than the S&P 500's 1.3% or so. For someone my age, a bit of income isn't a bad thing. Second, the FTSE 100 companies are genuinely global — they earn most of their revenue overseas, so you're not actually betting purely on the UK economy. Shell, HSBC, Unilever, AstraZeneca, Rio Tinto — these are global businesses that happen to be listed in London.
Third, and this is the honest reason: a bit of home bias feels comfortable. I live in the UK. I spend in pounds. Having some investments denominated in sterling, paying dividends in sterling, just feels right. Is that rational? Not entirely. But personal finance is personal — and being able to sleep at night matters more than theoretical optimality.
I put £200 into the iShares Core FTSE 100 UCITS ETF (ISF) on Trading 212. The fee is 0.07% which is excellent. I'll probably add to this position gradually — it won't ever be a huge part of my portfolio, maybe 5% or so, but it gives me some UK-specific exposure that the global trackers dilute.
This is what works for me and my circumstances. If you're 30 with decades of accumulation ahead, a FTSE 100 tracker might not make as much sense. If you're closer to retirement and value income, it might. Your call, not mine.
As always: this is what I did. Not what you should do. Do your own research. All investing carries risk. The FTSE 100 has underperformed other major indices over various periods, and past performance doesn't predict future returns.